Cover
Cover - USD ($) | 12 Months Ended | ||
Dec. 31, 2023 | Mar. 07, 2024 | Jun. 30, 2023 | |
Cover [Abstract] | |||
Document Type | 10-K | ||
Document Annual Report | true | ||
Document Period End Date | Dec. 31, 2023 | ||
Current Fiscal Year End Date | --12-31 | ||
Document Transition Report | false | ||
Entity File Number | 001-40336 | ||
Entity Registrant Name | Karat Packaging Inc. | ||
Entity Incorporation, State or Country Code | DE | ||
Entity Tax Identification Number | 83-2237832 | ||
Entity Address, Address Line One | 6185 Kimball Avenue | ||
Entity Address, City or Town | Chino | ||
Entity Address, State or Province | CA | ||
Entity Address, Postal Zip Code | 91708 | ||
City Area Code | 626 | ||
Local Phone Number | 965-8882 | ||
Title of 12(b) Security | Common Stock, $0.001 par value | ||
Trading Symbol | KRT | ||
Security Exchange Name | NASDAQ | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Accelerated Filer | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | true | ||
Entity Ex Transition Period | false | ||
ICFR Auditor Attestation Flag | false | ||
Document Financial Statement Error Correction [Flag] | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 103,563,074 | ||
Entity Common Stock, Shares Outstanding | 19,972,030 | ||
Documents Incorporated by Reference | Portions of the registrant’s Proxy Statement for the 2024 Annual Meeting of Stockholders are incorporated herein by reference in Part III of this Annual Report on Form 10-K to the extent stated herein. Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended December 31, 2023. | ||
Entity Central Index Key | 0001758021 | ||
Document Fiscal Year Focus | 2023 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false |
Audit Information
Audit Information | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Audit Information [Abstract] | ||
Auditor Firm ID | 238 | 243 |
Auditor Name | PricewaterhouseCoopers LLP | BDO USA, LLP |
Auditor Location | Los Angeles, California | Los Angeles, California |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Dec. 31, 2023 | Dec. 31, 2022 |
Current assets | ||
Cash and cash equivalents (including $13,566 and $2,022 associated with variable interest entity at December 31, 2023 and 2022, respectively) | $ 23,076 | $ 16,041 |
Short-term investments | 26,343 | 0 |
Accounts receivable, net of allowance for bad debt of $392 and $1,260 at December 31, 2023 and 2022, respectively (including $0 and $6 associated with variable interest entity at December 31, 2023 and 2022, respectively) | 27,763 | 29,912 |
Inventories | 71,528 | 71,206 |
Prepaid expenses and other current assets (including $82 and $191 associated with variable interest entity at December 31, 2023 and 2022, respectively) | 6,219 | 6,641 |
Total current assets | 154,929 | 123,800 |
Property and equipment, net (including $44,185 and $45,399 associated with variable interest entity at December 31, 2023 and 2022, respectively) | 95,226 | 95,568 |
Deposits | 1,047 | 12,413 |
Goodwill | 3,510 | 3,510 |
Intangible assets, net | 327 | 353 |
Operating right-of-use assets | 20,739 | 15,713 |
Other assets (including $53 and $38 associated with variable interest entity at December 31, 2023 and 2022, respectively) | 619 | 818 |
Total assets | 276,397 | 252,175 |
Current liabilities | ||
Accrued expenses (including $591 and $625 associated with variable interest entity at December 31, 2023 and 2022, respectively) | 10,576 | 9,005 |
Customer deposits (including $116 and $165 associated with variable interest entity at December 31, 2023 and 2022, respectively) | 951 | 1,281 |
Long-term debt, current portion (including $1,122 and $957 associated with variable interest entity at December 31, 2023 and 2022, respectively) | 1,122 | 957 |
Operating lease liabilities, current portion | 4,800 | 4,511 |
Other payables (including $1,302 and $0 associated with variable interest entity at December 31, 2023 and 2022, respectively) | 3,200 | 0 |
Total current liabilities | 44,401 | 39,253 |
Deferred tax liability | 4,197 | 5,156 |
Long-term debt, net of current portion and debt discount of $203 and $216 at December 31, 2023 and December 31, 2022, respectively (including $48,396 and $41,558 associated with variable interest entity at December 31, 2023 and 2022, respectively, and debt discount of $203 and $216 associated with variable interest entity at December 31, 2023 and 2022, respectively) | 48,396 | 41,558 |
Operating lease liabilities, net of current portion | 16,687 | 11,623 |
Other liabilities (including $0 and $1,302 associated with variable interest entity at December 31, 2023 and 2022, respectively) | 26 | 2,652 |
Total liabilities | 113,707 | 100,242 |
Commitments and Contingencies (Note 20) | ||
Karat Packaging Inc. stockholders’ equity | ||
Preferred stock, $0.001 par value, 10,000,000 shares authorized, no shares issued and outstanding, as of December 31, 2023 and 2022 | 0 | 0 |
Common stock, $0.001 par value, 100,000,000 shares authorized, 19,988,482 and 19,965,482 shares issued and outstanding, respectively, as of December 31, 2023 and 19,908,005 and 19,885,005 shares issued and outstanding, respectively, as of December 31, 2022 | 20 | 20 |
Additional paid in capital | 86,667 | 85,792 |
Treasury stock, $0.001 par value, 23,000 shares as of both December 31, 2023 and 2022 | (248) | (248) |
Retained earnings | 67,679 | 56,118 |
Total Karat Packaging Inc. stockholders’ equity | 154,118 | 141,682 |
Noncontrolling interest | 8,572 | 10,251 |
Total stockholders’ equity | 162,690 | 151,933 |
Total liabilities and stockholders’ equity | 276,397 | 252,175 |
Nonrelated Party | ||
Current liabilities | ||
Accounts payable (including $63 and $2 associated with variable interest entity at December 31, 2023 and 2022, respectively) | 18,446 | 18,559 |
Related Party | ||
Current liabilities | ||
Accounts payable (including $63 and $2 associated with variable interest entity at December 31, 2023 and 2022, respectively) | $ 5,306 | $ 4,940 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands | Dec. 31, 2023 | Dec. 31, 2022 |
Cash and cash equivalents | $ 23,076 | $ 16,041 |
Allowance for bad debt | 392 | 1,260 |
Prepaid expenses and other current assets | 6,219 | 6,641 |
Property and equipment, net | 95,226 | 95,568 |
Other assets | 619 | 818 |
Accrued expenses | 10,576 | 9,005 |
Customer deposits | 951 | 1,281 |
Long-term debt, current portion | 1,122 | 957 |
Other payable | 3,200 | 0 |
Long-term debt, net of current portion | (203) | (216) |
Other liabilities | $ 26 | $ 2,652 |
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized (in shares) | 10,000,000 | 10,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 100,000,000 | 100,000,000 |
Common stock, shares issued (in shares) | 19,988,482 | 19,908,005 |
Common stock, shares outstanding (in shares) | 19,965,482 | 19,885,005 |
Treasury stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Treasury stock, shares (in shares) | 23,000 | 23,000 |
VIE, Primary Beneficiary | ||
Cash and cash equivalents | $ 13,566 | $ 2,022 |
Allowance for bad debt | 0 | 6 |
Prepaid expenses and other current assets | 82 | 191 |
Property and equipment, net | 44,185 | 45,399 |
Other assets | 53 | 38 |
Accounts payable | 63 | 2 |
Accrued expenses | 591 | 625 |
Customer deposits | 116 | 165 |
Long-term debt, current portion | 1,122 | 957 |
Other payable | 1,302 | 0 |
Long-term debt, net of current portion | (48,396) | (41,558) |
Debt discount | (203) | (216) |
Other liabilities | $ 0 | $ 1,302 |
CONSOLIDATED STATEMENTS OF INCO
CONSOLIDATED STATEMENTS OF INCOME - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Income Statement [Abstract] | ||
Net sales | $ 405,651 | $ 422,957 |
Cost of goods sold | 252,608 | 290,871 |
Gross profit | 153,043 | 132,086 |
Operating expenses: | ||
Selling expenses | 41,490 | 35,844 |
General and administrative expenses (including $2,749 and $2,775 associated with variable interest entity for the years ended December 31, 2023 and 2022, respectively) | 66,952 | 66,259 |
Impairment expense and loss (gain), net, on disposal of machinery | 2,525 | (32) |
Total operating expenses | 110,967 | 102,071 |
Operating income | 42,076 | 30,015 |
Other income (expenses) | ||
Rental income (including $981 and $949 associated with variable interest entity for the years ended December 31, 2023 and 2022, respectively) | 1,090 | 949 |
Other expense, net | (45) | (228) |
Gain on foreign currency transactions | 103 | 1,568 |
Interest income (including $606 and $2,171 associated with variable interest entity for the years ended December 31, 2023 and 2022, respectively) | 1,803 | 2,226 |
Interest expense (including $2,019 and $1,821 associated with variable interest entity for the years ended December 31, 2023 and 2022, respectively) | (2,043) | (2,017) |
Total other income, net | 908 | 2,498 |
Income before provision for income taxes | 42,984 | 32,513 |
Provision for income taxes | 9,804 | 6,676 |
Net income | 33,180 | 25,837 |
Net income attributable to noncontrolling interest | 710 | 2,189 |
Net income attributable to Karat Packaging Inc. | $ 32,470 | $ 23,648 |
Basic and diluted earnings per share: | ||
Basic (in dollars per share) | $ 1.63 | $ 1.19 |
Diluted (in dollars per share) | $ 1.63 | $ 1.19 |
Weighted average common shares outstanding, basic (in shares) | 19,904,698 | 19,824,911 |
Weighted average common shares outstanding, diluted (in shares) | 19,977,712 | 19,925,905 |
CONSOLIDATED STATEMENTS OF IN_2
CONSOLIDATED STATEMENTS OF INCOME (Parenthetical) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
General and administrative expenses | $ 66,952 | $ 66,259 |
Rental income | 1,090 | 949 |
Other (expense) income | (45) | (228) |
Interest income | 1,803 | 2,226 |
Interest expense | 2,043 | 2,017 |
VIE, Primary Beneficiary | ||
General and administrative expenses | 2,749 | 2,775 |
Rental income | 981 | 949 |
Interest income | 606 | 2,171 |
Interest expense | $ 2,019 | $ 1,821 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - USD ($) $ in Thousands | Total | Total Stockholders’ Equity Attributable to Karat Packaging Inc. | Common Stock | Treasury Stock | Additional Paid-in Capital | Retained Earnings | Noncontrolling Interest |
Balance at the beginning of period (in shares) at Dec. 31, 2021 | 19,827,417 | ||||||
Balance at the beginning of period at Dec. 31, 2021 | $ 132,025 | $ 122,900 | $ 20 | $ (248) | $ 83,694 | $ 39,434 | $ 9,125 |
Treasury stock, balance at the beginning of period (in shares) at Dec. 31, 2021 | (23,000) | ||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Cash dividends declared ($0.35 per share) | (6,964) | (6,964) | (6,964) | ||||
Issuance of common stock upon vesting of restricted stock units (in shares) | 75,588 | ||||||
Stock-based compensation | $ 2,047 | 2,047 | 2,047 | ||||
Exercise of stock options (in shares) | 5,000 | 5,000 | |||||
Exercise of stock options | $ 51 | 51 | 51 | ||||
Noncontrolling interest tax withholding | (1,063) | (1,063) | |||||
Net income | $ 25,837 | 23,648 | 23,648 | 2,189 | |||
Balance at the end of period (in shares) at Dec. 31, 2022 | 19,885,005 | 19,908,005 | |||||
Balance at the end of period at Dec. 31, 2022 | $ 151,933 | 141,682 | $ 20 | $ (248) | 85,792 | 56,118 | 10,251 |
Treasury stock, balance at the end of period (in shares) at Dec. 31, 2022 | (23,000) | (23,000) | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Cash dividends declared ($0.35 per share) | $ (20,909) | (20,909) | (20,909) | ||||
Issuance of common stock upon vesting of restricted stock units (in shares) | 73,617 | ||||||
Issuance of common stock upon vesting of restricted stock units | (18) | (18) | (18) | ||||
Stock-based compensation | $ 770 | 770 | 770 | ||||
Exercise of stock options (in shares) | 6,860 | 6,860 | |||||
Exercise of stock options | $ 123 | 123 | 123 | ||||
Distributions to shareholders, net of tax withholding | (2,295) | (2,295) | |||||
Noncontrolling interest tax withholding | (94) | (94) | |||||
Net income | $ 33,180 | 32,470 | 32,470 | 710 | |||
Balance at the end of period (in shares) at Dec. 31, 2023 | 19,965,482 | 19,988,482 | |||||
Balance at the end of period at Dec. 31, 2023 | $ 162,690 | $ 154,118 | $ 20 | $ (248) | $ 86,667 | $ 67,679 | $ 8,572 |
Treasury stock, balance at the end of period (in shares) at Dec. 31, 2023 | (23,000) | (23,000) |
CONSOLIDATED STATEMENTS OF ST_2
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Parenthetical) - $ / shares | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Statement of Stockholders' Equity [Abstract] | ||
Dividends paid to stockholders (in dollars per share) | $ 1.05 | $ 0.35 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Cash flows from operating activities | ||
Net income | $ 33,180 | $ 25,837 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization (including $1,214 associated with variable interest entity for both the year ended December 31, 2023 and 2022) | 10,783 | 10,405 |
Adjustments to allowance for bad debt | (711) | 1,010 |
Adjustments to inventory reserve | (399) | 6 |
Write-off of inventory | 3,897 | 3,470 |
Impairment of deposits | 549 | 465 |
Write-off of vendor prepayment | 1,124 | 0 |
Loss (gain), net, on disposal of machinery and equipment | 2,002 | (32) |
Change in fair value of interest rate swap (including $0 and $2,159 associated with variable interest entity for the year ended December 31, 2023 and 2022, respectively) | 0 | (2,159) |
Amortization of loan fees (including $57 and $40 associated with variable interest entity for the year ended December 31, 2023 and 2022, respectively) | 81 | 40 |
Accrued interest on certificates of deposit | (155) | 0 |
Stock-based compensation | 770 | 2,047 |
Amortization of operating right-of-use assets | 4,969 | 3,822 |
Deferred income taxes | (959) | (478) |
(Increase) decrease in operating assets | ||
Accounts receivable (including $6 and $18 associated with variable interest entity for the year ended December 31, 2023 and 2022, respectively) | 2,860 | 1,854 |
Inventories | (3,820) | (16,210) |
Prepaid expenses and other current assets (including $109 and $75 associated with variable interest entity for the year ended December 31, 2023 and 2022, respectively) | (466) | (1,514) |
Other assets (including $14 and $27 associated with variable interest entity for the year ended December 31, 2023 and 2022, respectively) | 1,439 | (36) |
Increase (decrease) in operating liabilities | ||
Accounts payable (including $60 and $495 associated with variable interest entity for the year ended December 31, 2023 and 2022, respectively) | 696 | 89 |
Accrued expenses (including $34 and $402 associated with variable interest entity for the year ended December 31, 2023 and 2022, respectively) | 1,571 | 1,571 |
Related party payable | 366 | 2,937 |
Income taxes payable | 0 | (85) |
Customer deposits (including $49 and $77 associated with variable interest entity for the year ended December 31, 2023 and 2022, respectively) | (330) | 66 |
Operating lease liability | (4,642) | (3,780) |
Other liabilities (including $0 and $1 associated with variable interest entity for the year ended December 31, 2023 and 2022, respectively) | 574 | 149 |
Net cash provided by operating activities | 53,379 | 29,474 |
Cash flows from investing activities | ||
Purchases of property and equipment | (2,835) | (2,657) |
Proceeds on disposal of property and equipment | 841 | 77 |
Payments for costs incurred from sale of machinery and equipment | (186) | 0 |
Deposits paid for joint venture investment | (2,900) | (5,876) |
Deposits refunded from joint venture investment | 6,900 | 1,876 |
Deposits refunded from cancelled machinery orders | 503 | 0 |
Deposits paid for property and equipment | (6,309) | (12,090) |
Proceeds from settlement of interest rate swap (including $0 and $825 associated with variable interest entity for the year ended December 31, 2023 and 2022, respectively) | 0 | 825 |
Purchase of short-term investments (including $8,000 and $0 associated with variable interest entity for the year ended December 31, 2023 and 2022, respectively) | (49,188) | 0 |
Redemption of short-term investments (including $8,000 and $0 associated with variable interest entity for the year ended December 31, 2023 and 2022, respectively) | 23,000 | 0 |
Net cash used in investing activities | (30,174) | (17,845) |
Cash flows from financing activities | ||
Proceeds from line of credit | 0 | 21,100 |
Payments on line of credit | 0 | (21,100) |
Proceeds from long-term debt (including $8,000 and $27,477 associated with variable interest entity for the year ended December 31, 2023 and 2022, respectively) | 8,000 | 27,477 |
Payments for lender fees | (61) | 0 |
Payments on long-term debt (including $1,010 and $21,572 associated with variable interest entity for the year ended December 31, 2023 and 2022, respectively) | (1,010) | (21,572) |
Tax withholding on vesting of restricted stock units | (18) | 0 |
Proceeds from exercise of common stock options | 123 | 51 |
Dividends paid to shareholders | (20,909) | (6,964) |
Distributions to shareholders, net of tax withholding | (2,295) | 0 |
Payments of noncontrolling interest tax withholding (including $0 and $1,063 associated with variable interest entity for the year ended December 31, 2023 and 2022, respectively) | 0 | (1,063) |
Net cash used in financing activities | (16,170) | (2,071) |
Net increase in cash and cash equivalents | 7,035 | 9,558 |
Cash and cash equivalents | ||
Beginning of year | 16,041 | 6,483 |
End of year | 23,076 | 16,041 |
Supplemental disclosures of non-cash investing and financing activities: | ||
Transfers from deposit to property and equipment | 10,463 | 9,859 |
Non-cash purchases of property and equipment | 148 | 196 |
Supplemental disclosures of cash flow information: | ||
Cash paid for income tax | 11,765 | 8,303 |
Cash paid for interest | $ 1,996 | $ 1,978 |
CONSOLIDATED STATEMENTS OF CA_2
CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Depreciation and amortization | $ 10,783 | $ 10,405 |
Change in fair value of interest rate swap | 0 | 2,159 |
Amortization of loan fees | (81) | (40) |
Accounts receivable | (2,860) | (1,854) |
Prepaid expenses and other current assets | 466 | 1,514 |
Other assets | (1,439) | 36 |
Accounts payable | 696 | 89 |
Accrued expenses | 1,571 | 1,571 |
Customer deposits | (330) | 66 |
Other liabilities | 574 | 149 |
Proceeds from settlement of interest rate swap | 0 | 825 |
Purchase of short-term investments | 49,188 | 0 |
Proceeds from sale of short-term investments | 23,000 | 0 |
Proceeds from long-term debt | 8,000 | 27,477 |
Repayments of long-term debt | (1,010) | (21,572) |
Distributions to shareholders, net of tax withholding | (2,295) | 0 |
Payments of noncontrolling interest tax withholding associated with variable interest entity | 0 | (1,063) |
VIE, Primary Beneficiary | ||
Depreciation and amortization | 1,214 | 1,214 |
Change in fair value of interest rate swap | 0 | (2,159) |
Amortization of loan fees | 57 | 40 |
Accounts receivable | 6 | 18 |
Prepaid expenses and other current assets | 109 | 75 |
Other assets | (14) | (27) |
Accounts payable | 60 | (495) |
Accrued expenses | (34) | 402 |
Customer deposits | (49) | 77 |
Other liabilities | 0 | (1) |
Proceeds from settlement of interest rate swap | 0 | 825 |
Purchase of short-term investments | 8,000 | 0 |
Proceeds from sale of short-term investments | 8,000 | 0 |
Proceeds from long-term debt | 8,000 | 27,477 |
Repayments of long-term debt | (1,010) | (21,572) |
Distributions to shareholders, net of tax withholding | (2,295) | 0 |
Payments of noncontrolling interest tax withholding associated with variable interest entity | $ 0 | $ (1,063) |
Nature of Operations
Nature of Operations | 12 Months Ended |
Dec. 31, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Operations | Nature of Operations Lollicup USA Inc. (“Lollicup”) was incorporated on January 21, 2001 under the laws of the State of California as an S-corporation. Effective January 1, 2018, Lollicup elected to convert from an S-Corporation to a C-Corporation. Karat Packaging Inc. (“Karat Packaging”) was incorporated on September 26, 2018 as a Delaware corporation and became the holding company for Lollicup (collectively, the “Company”) through a share exchange with the shareholders of Lollicup. On April 15, 2021, the Company completed an initial public offering of shares of its common stock. The shares are listed on the NASDAQ Global Market under the symbol "KRT". The Company is a manufacturer and distributor of single-use disposable products used in a variety of restaurant and foodservice settings. The Company supplies a wide range of products such as food containers, tableware, cups, lids, cutlery, and straws. The products are available in plastic, paper, bagasse, biopolymer-based, and other compostable forms. In addition to manufacturing and distribution, the Company offers customized solutions to customers, including new product development, design, printing, and logistics services, and distributes certain specialty food and beverages products, such as syrups, boba, and coffee drinks. The Company supplies products to national and regional distributors, supermarkets, airlines, restaurants, and convenience stores as well as to smaller chains and businesses including coffee houses, bubble tea cafes, pizza parlors, and frozen yogurt shops. The Company currently operates manufacturing facilities and distribution centers in Chino, California; Rockwall, Texas, and Kapolei, Hawaii. In addition, the Company operates eight other distribution centers located in Puyallup, Washington; Summerville, South Carolina; Branchburg, New Jersey; Kapolei, Hawaii; City of Industry, California, Aurora, Illinois; and Sugar Land, Texas . As described in Note 22 — Subsequent Events , the Company entered into a lease agreement on February 12, 2024 for an additional distribution center in Mesa, Arizona. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2023 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation: The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and the rules of the Securities and Exchange Commission (“SEC”). Principles of Consolidation: The consolidated financial statements include the accounts of Karat Packaging and its wholly-owned and controlled operating subsidiaries: Lollicup, Lollicup Franchising, LLC (“Lollicup Franchising”), and Global Wells, a variable interest entity wherein the Company is the primary beneficiary. All intercompany accounts and transactions have been eliminated. Noncontrolling Interests: The Company consolidates its variable interest entity, Global Wells, in which the Company is the primary beneficiary. Noncontrolling interests represent third-party equity ownership interests in Global Wells. The Company recognizes noncontrolling interests as equity in the consolidated financial statements separate from the Company’s stockholders’ equity. The amount of net income attributable to noncontrolling interests is disclosed in the consolidated statements of income. Tax payments made by the Company on behalf of the noncontrolling interests are deducted from their equity balances, as shown in the consolidated statements of stockholders’ equity. Estimates and Assumptions: Management uses estimates and assumptions in preparing financial statements in accordance with GAAP. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ materially from the estimates that were assumed in preparing the consolidated financial statements. Estimates that are significant to the consolidated financial statements include stock-based compensation, allowance for doubtful accounts and reserve for excess and obsolete inventory. Reporting Segments: The Company manages and evaluates its operations in one reportable segment. This segment consists of manufacturing and distribution of a broad portfolio of single-use products that are used to serve food and beverages and are available in plastic, paper, bagasse, biopolymer-based, and other compostable forms . It also consists of the distribution of certain specialty food and beverage products, such as syrup, boba, and coffee drinks, as well as restaurant and warehouse supplies. The Company’s long-lived assets are all located in the United States, and its revenues are almost entirely generated in the United States. Earnings per share: Basic earnings per common share is calculated by dividing net income attributable to Karat Packaging, Inc. by the weighted average number of common shares outstanding during the related period. Diluted earnings per common share is calculated by adjusting weighted average outstanding shares, assuming conversion of all potentially dilutive shares. Out-of-period adjustment: During the quarter ended December 31, 2023, the Company recorded an out-of-period adjustment to write-off a vendor prepayment of $1,124,000 due to the resolution of a legal contingency that should have been reflected in its quarterly financial statements for the quarter ended September 30, 2023. The Company evaluated the error and determined it was immaterial to both impacted periods. Although the full year financial statements for the year ended December 31, 2023 are not affected, the impact of the adjustment for the quarter ended December 31, 2023 was a decrease to other assets and an increase in general and administrative expenses of $1,124,000 and a tax-effected decrease to net income of $847,000. See Note 20 — Commitments and Contingencies for further discussion about this litigation. During the quarter ended December 31, 2023, the Company also recorded the following misclassification adjustments for the full year amounts within the consolidated statement of income with no impact on net income: (i) $6,440,000 of online sales third-party platform fees from net sales to selling expense, including $4,764,000 deemed to be out-of-period, (ii) $3,947,000 of certain production expenses primarily related to machinery repair and maintenance from general and administrative expenses to cost of goods sold, including $3,392,000 deemed to be out-of-period, and (iii) $2,147,000 of payroll and employee-related costs for the Company's sales team within operating expenses from general and administrative expenses to selling expenses, including $1,529,000 deemed to be out-of-period. All of the three out-of-period adjustments were recorded to correct immaterial errors in the Company's previously issued quarterly financial statements for the quarters ended March 31, June 30 and September 30, 2023. The aggregate impact of these out-of-period adjustments for the quarter ended December 31, 2023 was an increase in net sales of $4,764,000, an increase in cost of goods sold of $3,392,000, an increase in selling expenses of $6,293,000, and a decrease in general and administrative expenses of $4,921,000. These misclassification adjustments had no effect on totals for assets and liabilities, shareholders' equity, cash flows or net income for either the quarter ended December 31, 2023 or any of the previously reported quarters. Reclassification: Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications had no effect on previously reported totals for assets and liabilities, shareholders' equity, cash flows or net income. Cash and cash equivalents: The Company considers all highly liquid investments purchased with an original maturity at the date of purchase of three months or less to be cash equivalents. At December 31, 2023 and 2022, cash and cash equivalents were comprised of cash on hand, cash deposited with banks, and cash held in certain money market fund. Accounts Receivable and Allowances: Accounts receivable consists primarily of amounts due from customers. Accounts receivable are carried at their estimated collectible amounts and are periodically evaluated for collectability based on past credit history. The Company recognizes an allowance for doubtful accounts on accounts receivable in an amount equal to the estimated expected losses net of recoveries. The Company estimates this allowance based on knowledge of the customers' financial condition, review of historical receivable and reserve trends, and other pertinent information. The Company also maintains a sales allowance primarily related to potential billing adjustments due to situations such as product returns and damages. The amount of the sales allowance is determined based on a historical transaction analysis. Any additions to the sales allowance are recorded as a reduction to net revenue. Inventories: Inventories consist of raw materials, semi-finished goods, and finished goods. Inventory cost is determined using the weighted-average method and valued at lower of cost or net realizable value. The Company maintains a reserve for excess and obsolete inventory, taking into account various factors including historic usage, expected demand, anticipated sales price, and product expiration and obsolescence. Property and Equipment: Property and equipment are carried at cost, net of accumulated depreciation and amortization, and net of impairment losses, if any. Depreciation of property and equipment are computed by straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized using the straight-line method over the term of the lease, or the estimated life of the improvement, whichever is less. The estimated useful life of property and equipment are as follows: Machinery and equipment 5 years to 15 years Leasehold improvements Lesser of useful life or lease term Vehicles 5 years Furniture and fixtures 7 years Building and building improvements 10 years to 40 years Property held under capital leases 3 years to 5 years Computer hardware and software 3 years Normal repairs and maintenance are expensed as incurred, whereas significant changes that materially increase values or extend useful lives are capitalized and depreciated over the estimated useful lives of the related assets. Deposits: Deposits are payments made for machinery and equipment as well as construction and improvement for the Company’s facilities. Included in deposits are also payments made to lessors of leased properties as security for the full and faithful observance of contracts, which will be refunded to the Company upon expiration or termination of the contract. Impairment of Long-lived Assets: The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. If such events or circumstances exist, an impairment test is performed which comprises of two steps. The first step compares the carrying amount of the asset to the sum of expected undiscounted future cash flows. If the sum of expected undiscounted future cash flows exceeds the carrying amount of the asset, no impairment is taken. If the sum of expected undiscounted future cash flows is less than the carrying amount of the asset, a second step is warranted and an impairment loss is measured as the amount by which the carrying amount of the asset exceeds its fair value calculated using the present value of estimated net future cash flows. For the years ended December 31, 2023 and 2022, management concluded that an impairment of long-lived assets was not required. Business Combination and Goodwill: The Company applies the acquisition method of accounting for business combinations in accordance with GAAP, which requires the Company to make use of estimates and judgments to allocate the purchase price paid for acquisitions to the fair value of the assets, including identifiable intangible assets, and liabilities acquired. Such estimates may be based on significant unobservable inputs. The Company’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Fair values are subject to refinement for up to one year after the closing date of an acquisition as information relative to closing date fair values becomes available. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. Goodwill is the excess of the acquisition price over the fair value of the tangible and identifiable intangible net assets acquired. The Company performs an impairment test of goodwill annually or whenever events and circumstances indicate that the carrying amount of goodwill may exceed its fair value. The Company operates as a single operating segment with one reporting unit and consequently evaluates goodwill for impairment based on an evaluation of the fair value of the Company as a whole. During the years ended December 31, 2023 and 2022, the Company determined no goodwill impairment has occurred. Government Grants: Government grants are not recognized unless there is reasonable assurance that Lollicup and Global Wells, recipients of the grants, will comply with the grants’ conditions and that the grants will be received. As of December 31, 2023 and 2022, Lollicup received cumulative grants of $1,500,000 and $1,350,000, respectively. As of both December 31, 2023 and 2022, Global Wells received cumulative grants of $1,302,000. These grants are reported as deferred income within other payable in the accompanying consolidated balance sheet as of December 31, 2023, and within other liabilities in the accompanying consolidated balance sheet as of December 31, 2022, as Lollicup and Global Wells have not fully met all conditions attached to the grants. These conditions include requiring the facility in Rockwall, Texas to maintain a certain minimum tax value for 5 years calendar years through 2024 (the “Required Period”), continue operations in the facility for the Required Period, have a minimum number of full time equivalent employees with a minimum average annual gross wage employed in the operation of the facility in the Required Period, and promise to not engage in a pattern or practice of unlawful employment of aliens during the Required Period. Derivative Instruments: Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 815, Derivatives and Hedging , requires companies to recognize all of its derivative instruments as either assets or liabilities in the balance sheet at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, a company must designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign operation. For derivative instruments not designated as hedging instruments, the gain or loss is recognized in the statement of income during the current period. In June 2019, Global Wells entered into an interest rate swap to manage interest rate risk, and accounted for such interest rate swap as a derivative instrument under ASC 815. In June 2022, Global Wells terminated this interest rate swap. The interest rate swap was not designated for hedge accounting and as such, changes in the fair value of the interest rate swap were recognized as interest income during the year ended December 31, 2022. See Note 11 — Interest Rate Swap for additional information on the interest rate swap and the related termination. Variable Interest Entities: The Company has a variable interest in Global Wells. In 2017, Lollicup along with three other unrelated parties formed Global Wells. Lollicup has a 13.5% ownership interest and a 25% voting interest in Global Wells, located in Rockwall, Texas. The purpose of this entity is to own, construct, and manage warehouses and manufacturing facilities. Global Wells’ operating agreement may require its members to make additional contributions only upon the unanimous decision of the members or where the cash in Global Wells’ bank account falls below $50,000. In the event that a member is unable to make an additional capital contribution, the other members will be required to make contributions to offset the amount that member cannot contribute, up to $25,000. Global Wells was determined to be a variable interest entity in accordance with ASC Topic 810, Consolidations , however, at the time the investment was made, it was determined that Lollicup was not the primary beneficiary. In 2018, Lollicup entered into an operating lease with Global Wells (“Texas Lease”). In 2020, the Company entered into another operating lease with Global Wells (“New Jersey Lease”). Upon entering into the Texas Lease with Lollicup on March 23, 2018, it was determined that Lollicup holds current and potential rights that give it the power to direct activities of Global Wells that most significantly impact Global Wells’ economic performance, the ability to receive significant benefits, and the obligation to absorb potentially significant losses, resulting in Lollicup having a controlling financial interest in Global Wells. As a result, Lollicup was deemed to be the primary beneficiary of Global Wells and has consolidated Global Wells under the risk and reward model of ASC 810, for the period from March 23, 2018. The monthly lease payments for both the Texas Lease and New Jersey Lease are eliminated upon consolidation. Assets recognized as a result of consolidating Global Wells do not represent additional assets that could be used to satisfy claims against the Company’s general assets. Conversely, liabilities recognized as a result of consolidating Global Wells do not represent additional claims of the Company’s general assets; rather they represent claims against the specific assets of Global Wells. See Note 10 — Long Term Debt for a description of the two term loans that Global Wells had with financial institutions as of December 31, 2023. Revenue Recognition: The Company generates revenues from product sales to customers that include national chains. regional chains, distributors, small local restaurants, and those that purchase for individual consumption primarily through our online stores. The Company considers revenue disaggregated by customer type to most accurately reflect the nature and uncertainty of its revenue and cash flows that are affected by economic factors. For the years ended December 31, 2023 and 2022, net sales disaggregated by customer type consist of the amounts shown below. Year Ended December 31, 2023 2022 (in thousands) National and regional chains $ 89,655 $ 95,786 Distributors 228,316 242,285 Online 61,265 53,697 Retail 26,415 31,189 $ 405,651 $ 422,957 • National and regional chains revenue: National and regional chains revenue is derived from chain restaurants and businesses with locations across multiple states. Revenue from transactions with national and regional chains is recognized at a point in time upon transfer of control of promised products to customers. Transfer of control typically occurs when the title and risk of loss passes to the customer. Shipping terms generally indicate when the title and risk of loss have passed, which is generally when the products are shipped from the Company’s facility to the customers. • Distributors revenue: Distributors revenues are derived from national and regional distributors across the U.S. that purchase the Company’s products for resale and distribution to other businesses such as restaurants, supermarkets, offices, and schools. Revenue from distributions is recognized at a point in time upon transfer of control of promised products to customers. Transfer of control typically occurs when the title and risk of loss passes to the customer. Shipping terms generally indicate when the title and risk of loss have passed, which is generally when the products are shipped from the Company’s facility to the customers. • Online revenue: Online revenue is derived from the Company's online storefront on www.lollicupstore.com, and other e-commerce platforms including Amazon, Walmart, eBay, and TikTok with customers largely consisting of small businesses such as small restaurants, coffee houses, bubble tea cafes, pizza parlors, and frozen yogurt shops . Revenue from online transactions is recognized at a point in time upon transfer of control of promised products to customers. Transfer of control typically occurs when the title and risk of loss passes to the customer. Shipping terms generally indicate when the title and risk of loss have passed, which is generally when the products are shipped from the Company’s facility to the customers. For online sales on third-party e-commerce platforms, the Company is the principal in the three-party arrangement and control of the products remains with the Company at all times until transferring to the end customer or upon return from the end customer. Online platform fees are recognized as selling expenses. • Retail revenue: Retail revenue is derived primarily from regional and local restaurants, coffee houses, bubble tea cafes, pizza parlors, and frozen yogurt shops. Revenue from retail transactions is recognized at a point in time upon transfer of control of promised products to customers. Transfer of control typically occurs when the title and risk of loss passes to the customer. Shipping terms generally indicate when the title and risk of loss have passed, which is generally when the products are shipped from the Company’s facility to the customers. In addition to product sales, the Company also generates revenue from logistics services which is the transportation and delivery of shipping containers from ports to local retail customers. Logistics services revenue is recognized over time due to the continuous transfer of control to the customer. As control transfers over time, revenue is recognized based on the extent of progress towards completion of the performance obligation. Logistics services revenue was $4,382,000 and $6,150,000 for the year ended December 31, 2023, and 2022, respectively. The transaction price is the amount of consideration to which the Company expects to be entitled to in exchange for transferring goods to the customer. The transaction price is allocated to each performance obligation based on the standalone or contractual selling price. Revenue is recorded based on the total estimated transaction price, which includes fixed consideration and estimates of variable consideration. Variable consideration includes estimates of returns, restocking fees, and consideration payable to customers for rebates, sales incentives, and cooperative advertisement. The Company estimates its variable consideration based on contract terms and historical experience of actual results using the expected value method. The Company’s contract liabilities consist primarily of rebates, sales incentives, consideration payable to customers for cooperative advertising, and customer deposits. As of December 31, 2023 and 2022, the rebates, sales incentives and cooperative advertising were not significant to the financial statements. Customer deposits are included in the current liabilities in the consolidated balance sheets. During the year ended December 31, 2023, and 2022, the Company recognized revenue of $1,077,000 and $1,104,000, respectively, related to customer deposits received as of the beginning of each respective year. Shipping and handling fees billed to a customer are recorded within net sales, with corresponding shipping and handling costs recorded in selling expense on the accompanying consolidated statements of income. Shipping and handling fees billed to customers are not deemed to be separate performance obligations for product sales. Shipping and handling costs included within selling expenses in the consolidated statements of income for the years ended December 31, 2023 and 2022 were $28,040,000 and $32,508,000, respectively. Sales taxes collected concurrently with revenue-producing activities and remitted to governmental authorities are excluded from revenue. Advertising Costs: The Company expenses costs of print production, trade show, online marketing, and other advertisements in the period in which the expenditure is incurred. Advertising costs included in operating expenses in the consolidated statements of income were $4,865,000 and $2,418,000 for the years ended December 31, 2023 and 2022, respectively. Income Taxes: The Company applies the provision of ASC 740, Income Taxes . Under ASC 740, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are evaluated for recoverability each reporting period by assessing all positive and negative evidence available in order to assess the need for a valuation allowance. A valuation allowance is used to reduce some or all of the deferred tax assets if, based upon the weight of available evidence, it is more likely than not that such deferred tax assets will not be realized. The Company accounts for uncertainties in income tax in accordance with ASC 740-10, Accounting for Uncertainty in Income Taxes . ASC 740-10 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This accounting standard also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes in the accompanying consolidated statement of income. Accrued interest and penalties are included in the income taxes payable in the consolidated balance sheet. Concentration of Credit Risk: Cash is maintained at financial institutions and, at times, balances exceed federally insured limits. Management believes that the credit risk related to such deposits is minimal. The Company extends credit based on the valuation of the customers’ financial condition and general collateral is not required. Management believes the Company is not exposed to any material credit risk on these accounts. For the years ended December 31, 2023 and 2022, purchases from the following vendor makes up greater than 10 percent of total purchases: Year Ended December 31, 2023 2022 Keary Global Ltd. (“Keary Global”) and its affiliate, Keary International, Ltd. – related parties 13 % 11 % Amounts due to the following vendors at December 31, 2023 and 2022, respectively, that exceed 10 percent of total accounts payable are as follows: December 31, 2023 December 31, 2022 Keary Global and its affiliate, Keary International – related parties 22 % 21 % Fuling Technology Co., Ltd. 16 % 18 % Wen Ho Industrial Co., Ltd 14 % * * Amounts payable represented less than 10% of total accounts payable. No customer accounted for more than 10 percent of sales or accounts receivable for the years ended December 31, 2023 and 2022. Fair Value Measurements: The Company follows ASC 820, Fair Value Measurements , which defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. ASC 820 establishes a hierarchy of valuation inputs based on the extent to which the inputs are observable in the marketplace. Observable inputs reflect market data obtained from sources independent of the reporting entity and unobservable inputs reflect the entity’s own assumptions about how market participants would value an asset or liability based on the best information available. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value. The three levels of inputs are as follows: Level 1 — Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date. Level 2 — Inputs that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the same term of the assets or liabilities. Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable. The Company has financial instruments classified within the fair value hierarchy, which consist of the following: • At December 31, 2023, the Company had money market accounts and certificates of deposit classified as Level 1 and Level 2, respectively, within the fair value hierarchy. The short-term investments comprise of certificates of deposits with an original maturity of longer than 90 days and are reported at their carrying value as current assets on the consolidated balance sheet. The carrying value of these short-term investments approximates fair value as they were purchased near or on December 31, 2023. • At December 31, 2022, the Company had money market accounts classified as Level 1 within the fair value hierarchy, and reported as a current asset on the consolidated balance sheet. The following table summarizes the Company’s fair value measurements by level at December 31, 2023 for the assets measured at fair value on a recurring basis: Level 1 Level 2 Level 3 (in thousands) Cash equivalents $ 5,956 $ 10,000 $ — Short-term investments — 26,343 — Fair value, December 31, 2023 $ 5,956 $ 36,343 $ — The following table summarizes the Company’s fair value measurements by level at December 31, 2022 for the assets measured at fair value on a recurring basis: Level 1 Level 2 Level 3 (in thousands) Cash equivalents $ 10,609 $ — $ — Fair value, December 31, 2022 $ 10,609 $ — $ — The Company has not elected the fair value option as presented by ASC 825, Fair Value Option for Financial Assets and Financial Liabilities , for the financial assets and liabilities that are not otherwise required to be carried at fair value. Under ASC 820, material financial assets and liabilities not carried at fair value, including accounts receivable, accounts payable, related-party payable, accrued and other liabilities, other payable and borrowings under promissory notes and Line of Credit (as defined below), are reported at their carrying value. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, related party payable, accrued expenses, and other payable at December 31, 2023 and 2022, approximated fair value because of the short maturity of these instruments. The following is a summary of the carrying amount and estimated fair value of the $23,000,000 and $28,700,000 term loans that mature in September 2026 and July 2027, respectively (the "2026 Term Loan" and "2027 Term Loan," respectively): December 31, 2023 Carrying Amount Estimated Fair Value (in thousands) 2026 Term Loan $ 21,490 $ 19,999 2027 Term Loan 28,028 27,810 $ 49,518 $ 47,809 December 31, 2022 Carrying Amount Estimated Fair Value (in thousands) 2026 Term Loan $ 22,168 $ 20,115 2027 Term Loan 20,563 18,918 $ 42,731 $ 39,033 The fair value of these financial instruments was determined using Level 2 inputs. Certain long-lived non-financial assets and liabilities may be required to be measured at fair value on a nonrecurring basis in certain circumstances, including when there is evidence of impairment. These non-financial assets and liabilities may include assets acquired in a business combination or property and equipment that are determined to be impaired. As of December 31, 2023 and 2022, the Company did not have any material non-financial assets or liabilities that had been measured at fair value subsequent to initial recognition. Foreign Currency: The Company includes gains or losses from foreign currency transactions, such as those resulting from the settlement of foreign receivables or payables, in the consolidated statements of income. The Company recorded a foreign currency gain of $103,000 and $1,568,000 for the years ended December 31, 2023 and 2022, respectively. Stock-Based Compensation: The Company recognizes stock-based compensation expense related to employee stock options and restricted stock units in accordance with ASC 718, Compensation — Stock Compensation . This standard requires the Company to record compensation expense equal to the fair value of awards granted to employees and non-employees. The fair value of share-based payment awards is estimated on the grant-date using the Black-Scholes option pricing model for stock options, and the closing price of the Company's common stock on the trading day immediately prior to the grant date for restricted stock units. Key input assumptions used in the Black-Scholes option pricing model to estimate the grant date fair value of stock options include the fair value |
Global Wells
Global Wells | 12 Months Ended |
Dec. 31, 2023 | |
Business Combination and Asset Acquisition [Abstract] | |
Global Wells | Global Wells The following financial information includes assets and liabilities of Global Wells and are included in the accompanying consolidated balance sheets, except for those that eliminate upon consolidation: December 31, 2023 December 31, 2022 (in thousands) Cash $ 13,566 $ 2,022 Accounts receivable — 53 Prepaid expenses and other current assets 558 191 Due from Lollicup USA Inc. — 4,700 Property and equipment, net 44,185 45,399 Other assets 3,240 4,262 Total assets 61,549 56,627 Accounts payable $ 63 $ 2 Accrued expenses 591 626 Customer deposits 116 165 Due to Lollicup USA Inc. 14 — Other payable 1,302 — Long-term debt, current portion 1,122 957 Long-term debt, net of current portion 48,396 41,558 Other liabilities — 1,302 Total liabilities $ 51,604 $ 44,610 During the year ended December 31, 2023, Global Wells made a pro rata distribution of its earnings of $3,956,000, net of all applicable withholding taxes, to its four members. Lollicup received $504,000, net of applicable withholding taxes, which is eliminated in the consolidated financial statements. See Note 22 — Subsequent Events for discussion about one of Global Well's members redemption of its ownership interest in this entity. |
Joint Venture
Joint Venture | 12 Months Ended |
Dec. 31, 2023 | |
Equity Method Investments and Joint Ventures [Abstract] | |
Joint Venture | Joint Venture On April 6, 2022, the Company entered into a joint venture agreement (the "JV Agreement") to establish a new corporation, Bio Earth, to build a bagasse factory in Taiwan. The JV Agreement stipulated an investment by the Company of approximately $6,500,000 for a 49% interest in Bio Earth. During the year ended December 31, 2022, the Company made payments of $5,876,000 and received a refund of $1,876,000 under the JV agreement. During the three months ended March 31, 2023, the Company made additional payments of $2,900,000 and received a refund of $900,000 under the JV Agreement. On May 8 2023, the Company entered into a Share Transfer Agreement (the "Share Transfer Agreement"), with approval of the Board of Directors, to sell all of its equity interest in Bio Earth to Keary Global for a total consideration of approximately $6,100,000 (the "Share Transfer"), representing the total net deposits made by the Company of $6,000,000 under the JV Agreement as discussed above and interest accruing at 5% per annum. Keary Global and its affiliate, Keary International are both owned or controlled by Jeff Yu, brother of the Company's Chief Executive Officer, Alan Yu. Concurrent with the Share Transfer Agreement, the Company also entered into an agreement with Keary Global, Bio Earth and Happiness Moon Co., Ltd. (“Happiness Moon”) pursuant to which (i) Lollicup agreed to transfer all Bio Earth shares, as well as its rights and obligations under the JV Agreement to Keary Global, (ii) Happiness Moon and Bio Earth agree to foregoing and (iii) Bio Earth shall manage the regulatory and registration requirements related to the Share Transfer. As of the end of the second quarter of 2023, the Company had completed the Share Transfer to Keary Global and received the total consideration of $6,100,000 in full. See Note 17 — Related Party Transactions for further discussion on the Company's business activities with Keary Global. |
Inventories
Inventories | 12 Months Ended |
Dec. 31, 2023 | |
Inventory Disclosure [Abstract] | |
Inventories | Inventories Inventories consist of the following: December 31, 2023 December 31, 2022 (in thousands) Raw materials $ 9,116 $ 18,061 Semi-finished goods 1,343 1,850 Finished goods 61,419 52,044 Subtotal 71,878 71,955 Less: inventory reserve (350) (749) Total inventories $ 71,528 $ 71,206 During the year ended December 31, 2023, the Company recorded $3,897,000 of adjustments and write-off related to certain inventory items, including a $1,710,000 write-off of raw materials, as the Company disposed of certain machinery and equipment in executing the strategy to scale back production in certain locations. See Note 16 — Impairment Expense and Loss (Gain), Net, on Disposal of Machinery for further discussion about the disposal of machinery. During the year ended December 31, 2022, the Company recorded a $3,470,000 write-off of certain inventory items, out of which $879,000 was determined to be out-of-period and was recorded to correct immaterial errors in its previously issued quarterly and annual financial statements. Inventory adjustments and write-offs are included in cost of goods sold on the accompanying consolidated statements of income. |
Property and Equipment
Property and Equipment | 12 Months Ended |
Dec. 31, 2023 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | Property and Equipment December 31, 2023 December 31, 2022 (in thousands) Machinery and equipment $ 67,321 $ 70,234 Leasehold improvements 19,085 19,063 Vehicles 7,038 6,725 Furniture and fixtures 1,015 1,016 Building 38,503 36,599 Land 11,907 11,907 Computer hardware and software 93 593 144,962 146,137 Less: accumulated depreciation and amortization (49,736) (50,569) Total property and equipment, net $ 95,226 $ 95,568 Depreciation and amortization expense is reported within general and administrative expense except for depreciation and amortization expense related to manufacturing facilities and equipment, which is included in cost of goods sold on the accompanying consolidated statements of income. Depreciation and amortization expense on property and equipment reported within general and administrative expense was $3,981,000 and $4,491,000 for the years ended December 31, 2023 and 2022, respectively. Depreciation and amortization expense on property and equipment reported within cost of goods sold was $6,776,000 and $5,887,000 for the years ended December 31, 2023 and 2022, respectively. |
Goodwill
Goodwill | 12 Months Ended |
Dec. 31, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill | Goodwill The following table summarizes the activity in the Company's goodwill from December 31, 2021 to December 31, 2023: (in thousands) Balance at December 31, 2021 $ 3,510 Goodwill acquired — Balance at December 31, 2022 $ 3,510 Goodwill acquired — Balance at December 31, 2023 $ 3,510 |
Line of Credit
Line of Credit | 12 Months Ended |
Dec. 31, 2023 | |
Debt Disclosure [Abstract] | |
Line of Credit | Line of Credit Pursuant to the terms of the Business Loan Agreement, dated February 23, 2018, between Lollicup, as borrower, and Hanmi Bank, as lender (as amended, the “Loan Agreement”), the Company has a line of credit with a maximum borrowing capacity of $40,000,000 (the “Line of Credit”) secured by the Company’s assets. The Company is not required to pay a commitment (unused) fee on the undrawn portion of the Line of Credit and interest is payable monthly. The Company is required to comply with certain financial covenants, including a minimum current ratio, minimum debt to earnings before interest, taxes, depreciation and amortization ("EBITDA") ratio and a minimum fixed charge coverage ratio. On March 14, 2023, the Company amended the Line of Credit. Prior to March 14, 2023, interest accrued at the annual rate of prime less 0.25% with a minimum floor of 3.25%. The amendment on March 14, 2023, among other things, (1) extended the maturity date to March 14, 2025, and (2) revised the interest on any Line of Credit borrowings to an annual rate of one month term Secured Overnight Financing Rate ("SOFR") plus 2.50%, with a SOFR floor of 1.0%. The Line of Credit also includes a standby letter of credit sublimit, which was amended and increased to $2,000,000 on August 18, 2022 and then to $5,000,000 on June 20, 2023. The Company had no borrowings outstanding under the Line of Credit as of both December 31, 2023 and December 31, 2022. The amount issued under the standby letter of credit was $3,766,000 and $1,070,000 as of December 31, 2023 and 2022, respectively. As of December 31, 2023, and 2022, the maximum remaining amount that could be borrowed under the Line of Credit was $36,234,000 and $38,930,000, respectively. As of both December 31, 2023 and 2022, the Company was in compliance with the financial covenants under the Line of Credit. Long-term debt consists of the following: December 31, 2023 December 31, 2022 (in thousands) The 2026 Term Loan, with an initial balance of $16,115,000 and an option to request for additional advances up to a maximum of $6,885,000 through September 2022, which the Company exercised in February 2022. Interest accrues at a fixed rate of 3.5% per annum. Principal and interest payments of $116,000 are due monthly throughout the term of the loan, with the remaining principal balance due at maturity. The loan is collateralized by substantially all of Global Wells’ assets and is guaranteed by Global Wells and one of the Company’s stockholders. In accordance with the loan agreement, Global Wells is required to comply with certain financial covenants, including a minimum debt service coverage ratio. $ 21,555 $ 22,168 The 2027 Term Loan, with an initial balance of $20,700,000 and an option to request for additional advances up to a maximum of $8,000,000 through June 30, 2023, which the Company exercised in March 2023. Interest accrues at a fixed rate of 4.375% per annum. Prior to August 1, 2023, principal and interest payments of $104,000 are due monthly. Beginning August 1, 2023, monthly principal and interest payments increased to $144,000 for the remainder of the loan term, with the remaining principal balance due at maturity. The loan is collateralized by substantially all of Global Wells’ assets and is guaranteed by one of the Company’s stockholders. In accordance with the loan agreement, Global Wells is required to comply with certain financial covenants, including a minimum debt coverage ratio. 28,166 20,563 Long-term debt 49,721 42,731 Less: unamortized loan fees (203) (216) Less: current portion (1,122) (957) Long-term debt, net of current portion $ 48,396 $ 41,558 At December 31, 2023, future maturities are: (in thousands) 2024 $ 1,122 2025 1,179 2026 20,798 2027 26,622 $ 49,721 The 2027 Loan was a refinance in June 2022 from a previous $21,580,000 term loan, and was accounted for as a debt modification. The Company was in compliance with all of its financial covenants as of both December 31, 2023 and 2022. |
Accrued Expenses
Accrued Expenses | 12 Months Ended |
Dec. 31, 2023 | |
Payables and Accruals [Abstract] | |
Accrued Expenses | Accrued Expenses Accrued expenses consist of the following: December 31, 2023 December 31, 2022 (in thousands) Accrued miscellaneous expenses $ 1,271 $ 513 Accrued payroll 1,685 2,327 Accrued ocean freight and other import costs 3,513 392 Accrued sale and use taxes 1,006 992 Accrued professional services fees 845 600 Accrued vacation and sick pay 619 543 Accrued property tax 552 1,164 Accrued shipping expenses 525 1,918 Accrued sales discount expense 487 448 Accrued interest expense 73 108 Total accrued expenses $ 10,576 $ 9,005 |
Long-Term Debt
Long-Term Debt | 12 Months Ended |
Dec. 31, 2023 | |
Debt Disclosure [Abstract] | |
Long-Term Debt | Line of Credit Pursuant to the terms of the Business Loan Agreement, dated February 23, 2018, between Lollicup, as borrower, and Hanmi Bank, as lender (as amended, the “Loan Agreement”), the Company has a line of credit with a maximum borrowing capacity of $40,000,000 (the “Line of Credit”) secured by the Company’s assets. The Company is not required to pay a commitment (unused) fee on the undrawn portion of the Line of Credit and interest is payable monthly. The Company is required to comply with certain financial covenants, including a minimum current ratio, minimum debt to earnings before interest, taxes, depreciation and amortization ("EBITDA") ratio and a minimum fixed charge coverage ratio. On March 14, 2023, the Company amended the Line of Credit. Prior to March 14, 2023, interest accrued at the annual rate of prime less 0.25% with a minimum floor of 3.25%. The amendment on March 14, 2023, among other things, (1) extended the maturity date to March 14, 2025, and (2) revised the interest on any Line of Credit borrowings to an annual rate of one month term Secured Overnight Financing Rate ("SOFR") plus 2.50%, with a SOFR floor of 1.0%. The Line of Credit also includes a standby letter of credit sublimit, which was amended and increased to $2,000,000 on August 18, 2022 and then to $5,000,000 on June 20, 2023. The Company had no borrowings outstanding under the Line of Credit as of both December 31, 2023 and December 31, 2022. The amount issued under the standby letter of credit was $3,766,000 and $1,070,000 as of December 31, 2023 and 2022, respectively. As of December 31, 2023, and 2022, the maximum remaining amount that could be borrowed under the Line of Credit was $36,234,000 and $38,930,000, respectively. As of both December 31, 2023 and 2022, the Company was in compliance with the financial covenants under the Line of Credit. Long-term debt consists of the following: December 31, 2023 December 31, 2022 (in thousands) The 2026 Term Loan, with an initial balance of $16,115,000 and an option to request for additional advances up to a maximum of $6,885,000 through September 2022, which the Company exercised in February 2022. Interest accrues at a fixed rate of 3.5% per annum. Principal and interest payments of $116,000 are due monthly throughout the term of the loan, with the remaining principal balance due at maturity. The loan is collateralized by substantially all of Global Wells’ assets and is guaranteed by Global Wells and one of the Company’s stockholders. In accordance with the loan agreement, Global Wells is required to comply with certain financial covenants, including a minimum debt service coverage ratio. $ 21,555 $ 22,168 The 2027 Term Loan, with an initial balance of $20,700,000 and an option to request for additional advances up to a maximum of $8,000,000 through June 30, 2023, which the Company exercised in March 2023. Interest accrues at a fixed rate of 4.375% per annum. Prior to August 1, 2023, principal and interest payments of $104,000 are due monthly. Beginning August 1, 2023, monthly principal and interest payments increased to $144,000 for the remainder of the loan term, with the remaining principal balance due at maturity. The loan is collateralized by substantially all of Global Wells’ assets and is guaranteed by one of the Company’s stockholders. In accordance with the loan agreement, Global Wells is required to comply with certain financial covenants, including a minimum debt coverage ratio. 28,166 20,563 Long-term debt 49,721 42,731 Less: unamortized loan fees (203) (216) Less: current portion (1,122) (957) Long-term debt, net of current portion $ 48,396 $ 41,558 At December 31, 2023, future maturities are: (in thousands) 2024 $ 1,122 2025 1,179 2026 20,798 2027 26,622 $ 49,721 The 2027 Loan was a refinance in June 2022 from a previous $21,580,000 term loan, and was accounted for as a debt modification. The Company was in compliance with all of its financial covenants as of both December 31, 2023 and 2022. |
Interest Rate Swaps
Interest Rate Swaps | 12 Months Ended |
Dec. 31, 2023 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Interest Rate Swaps | Interest Rate Swaps In June 2022, Global Wells terminated its ten-years floating-to-fixed interest rate swap, and recognized cash proceeds of $825,000 as gain on the settlement, which was included in interest income in the consolidated statements of income. This interest rate swap had a notional value of $21,580,000 as of the effective date of June 13, 2019 based on the prime rate versus a 5.1% fixed rate. |
Stockholder_s Equity
Stockholder’s Equity | 12 Months Ended |
Dec. 31, 2023 | |
Equity [Abstract] | |
Stockholder’s Equity | Stockholder’s Equity The Company’s Certificate of Incorporation authorize both common and preferred stock. The total number of shares of all classes of stock authorized for issuance is 110,000,000 shares, par value of $0.001, with 10,000,000 designated as preferred stock and 100,000,000 designated as common stock. Each holder of common stock and preferred stock shall be entitled to one vote per share held. During the year ended December 31, 2023, the Company paid out special and regular quarterly dividend totaling $20,909,000. During the year ended December 31, 2022, the Company paid out special dividend totaling $6,964,000. Additionally, as described in Note 22 — Subsequent Events , on February 7, 2024, the Company's Board of Directors declared a quarterly cash dividend of $0.30 per share on the Company's common stock. On September 12, 2023, certain selling stockholders completed a secondary public offering of shares of the Company's common stock. The Company did not receive any of the proceeds from the sale of these shares by the selling stockholders. The Company incurred offering transaction costs of $453,000, which were recognized in general and administrative expense in the consolidated statement of income . |
Stock-Based Compensation
Stock-Based Compensation | 12 Months Ended |
Dec. 31, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
Stock-Based Compensation | Stock-Based Compensation In January 2019, the Company’s board of directors adopted the 2019 Stock Incentive Plan (the “Plan”). A total of 2,000,000 shares of common stock were authorized and reserved for issuance under the Plan in the form of incentive or nonqualified stock options and stock awards. A committee appointed by the board of directors of the Company determines the terms and conditions of each grant under the Plan. Employees, directors, and consultants are eligible to receive stock options and stock awards under the Plan. The aggregate number of shares available under the Plan and the number of shares subject to outstanding options may be increased or decreased by the Plan administrator to reflect any changes in the outstanding common stock by reason of any recapitalization, reorganization, reclassification, stock split, reverse split, combination of shares, exchange of shares, stock dividend or other distribution payable in capital stock or similar transaction. The exercise price of incentive stock options may not be less than the fair market value of the common stock at the date of grant. The exercise price of incentive stock options granted to individuals that own greater than 10% of the voting stock may not be less than 110% of the fair market value of the common stock at the date of grant. The term of each incentive and nonqualified option is based upon conditions as determined by the option agreement; however, the term can be no more than ten years from the date of the grant. In the case of an incentive stock option granted to an optionee who, at the time the option is granted, owns stock representing more than 10% of the voting power of all classes of stock of the Company or any parent or subsidiary, the term of the option will be a shorter term as provided in the option agreement, but not more than five years from the date of the grant. As of December 31, 2023, a total of 1,350,684 shares of common stock was available for further award grants under the Plan. For the years ended December 31, 2023 and 2022, the Company recognized a total of $770,000 and $2,047,000 in stock-based compensation expense, respectively. The Company recognizes stock-based compensation over the vesting period, which is generally 3 years for both the restricted stock units and stock options. The Company recognized a net tax benefit of $187,000 and $89,000 from compensation expense related to stock options and restricted stock units during the years ended December 31, 2023 and 2022, respectively. Stock Options A summary of the Company’s stock option activity under the Plan for the years ended December 31, 2023 and 2022 is as follows: Number of Options Weighted-Average Exercise Price Weighted-Average Remaining Contract Life (In Years) Aggregate Intrinsic Value Outstanding at December 31, 2021 435,000 $ 18.76 9.7 $ 632,000 Granted 50,000 16.53 Exercised (5,000) 10.00 Forfeited (60,000) 18.86 Outstanding at December 31, 2022 420,000 $ 18.58 8.8 — Exercised (6,860) 17.84 Forfeited (26,667) 18.86 Outstanding at December 31, 2023 386,473 $ 18.58 7.8 $ 2,424 Vested and expected to vest at December 31, 2023 386,473 $ 18.58 7.8 $ 2,424 Exercisable at December 31, 2023 249,807 18.73 7.8 $ 1,528 The aggregate intrinsic value is calculated by subtracting the exercise price of the option from the closing price of the Company’s common stock on December 31, 2023, multiplied by the number of shares per each option. At December 31, 2023, total remaining stock-based compensation cost for unvested stock options under the Plan was approximately $183,000. The cost is expected to be recognized over a weighted-average period of 0.8 years. There were no stock options granted during the year ended December 31, 2023. The weighted-average grant date fair value of stock options granted during the year ended December 31, 2022 was $5.18. The assumptions that were used to calculate the grant date fair value of the Company’s stock option grants for the year ended December 31, 2022 were as follows: December 31, 2022 Risk-free interest rate 1.70 % Expected term (years) 6.25 years Volatility 30.0 % Dividend yield 0.40 % Restricted Stock Units A summary of the Company’s unvested restricted stock units activity under the Plan for the years ended December 31, 2023 and 2022 is as follows: Number of Shares Outstanding Weighted Average Grant Date Fair Value Unvested at December 31, 2021 159,000 $ 11.08 Granted 9,900 16.69 Vested (75,588) 10.72 Forfeited (11,166) 15.54 Unvested at December 31, 2022 82,146 $ 11.47 Vested (75,133) 11.13 Forfeited (1,667) 10.00 Unvested at December 31, 2023 5,346 $ 16.71 At December 31, 2023, total remaining stock-based compensation cost for unvested restricted stock units under the Plan was approximately $15,000. The cost is expected to be recognized over a weighted-average period of 0.8 years. There were no restricted stock units granted during the year ended December 31, 2023. There were 9,900 restricted stock units granted during the year ended December 31, 2022 with a weighted-average grant date fair value of $16.69. The total fair value of restricted stock units, as of their respective vesting date, during the year ended December 31, 2023, and 2022, was $1,612,000 and $1,156,000, respectively. |
Earnings Per Share
Earnings Per Share | 12 Months Ended |
Dec. 31, 2023 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Earnings Per Share (a) Basic Basic earnings per share is calculated by dividing the net income attributable to equity holders of the Company for the year by the weighted average number of common shares outstanding during the period. Year Ended December 31, 2023 2022 (in thousands, except per share data) Net income attributable to Karat Packaging Inc. $ 32,470 $ 23,648 Weighted average shares 19,905 19,825 Basic earnings per share $ 1.63 $ 1.19 (b) Diluted Diluted earnings per share is calculated based upon the weighted average number of common shares and common equivalent shares outstanding during the period, calculated using the treasury stock method. Under the treasury stock method, exercise proceeds include the amount the employee must pay for exercising stock options and the amount of compensation cost related to stock awards for future services that the Company has not yet recognized. Common equivalent shares are excluded from the computation in periods in which they have an anti-dilutive effect. The following table summarizes the calculation of diluted earnings per share: Year Ended December 31, 2023 2022 (in thousands, except per share data) Net income attributable to Karat Packaging Inc. $ 32,470 $ 23,648 Weighted average shares 19,905 19,825 Dilutive shares Stock options and restricted stock units 73 101 Total dilutive shares 19,978 19,926 Diluted earnings per share $ 1.63 $ 1.19 |
Leases
Leases | 12 Months Ended |
Dec. 31, 2023 | |
Leases [Abstract] | |
Leases | Leases The Company primarily leases manufacturing facilities, distribution centers and office spaces with lease terms expiring through 2031. The following table summarizes the Company's lease costs in the accompanying consolidated statement of income: Year Ended December 31, 2023 2022 (in thousands) Operating lease expense $ 6,171 $ 4,522 Short-term lease expense 314 311 Variable lease expense 1,130 817 Total lease expense $ 7,615 $ 5,650 For the year ended December 31, 2023 and 2022, total lease expense included in operating expenses was $6,541,000 and $4,574,000, respectively, and total lease expense included in cost of goods sold was $1,074,000 and $1,076,000, respectively. The following table presents supplemental information related to operating leases: December 31, 2023 December 31, 2022 (in thousands, except lease term and discount rate) Weighted average remaining lease term 4.51 years 4.27 years Weighted average discount rate 6.2 % 5.3 % Right-of-use assets obtained in exchange for operating lease liabilities $ 9,995 $ 10,727 Cash paid for amounts included in measurement of lease obligations: Operating cash flows from operating leases $ 5,768 $ 4,481 As of December 31, 2023, future lease payments under operating lease were as follows: (in thousands) 2024 $ 5,980 2025 5,113 2026 5,276 2027 3,993 2028 2,575 Thereafter 1,988 Total future lease payments 24,925 Less: imputed interest (3,438) Total lease liability balance $ 21,487 In September 2020, Global Wells entered into an operating lease agreement with an unrelated party as the landlord for a term of 38 months beginning September 9, 2020. The lease was extended for a period of two Sublease income for the year ended year ended December 31, 2023 and 2022 was $76,000 and $0, respectively. Sublease income is included in rental income in the accompanying consolidated statements of income. The expected rental income is $786,000 and $616,000 for the year ended December 31, 2024, and 2025, respectively. |
Impairment Expense and Loss (Ga
Impairment Expense and Loss (Gain), Net, on Disposal of Machinery and Equipment | 12 Months Ended |
Dec. 31, 2023 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Impairment Expense and Loss (Gain), Net, on Disposal of Machinery and Equipment | Impairment Expense and Loss (Gain), Net, on Disposal of Machinery and Equipment In February 2023, the Company started to execute a strategy to increase imports and scale back manufacturing in certain locations. The Company subsequently reached an agreement with two unrelated third-party vendors in Taiwan to sell them certain of its manufacturing machinery and equipment. During the year ended December 31, 2023, the Company also cancelled certain equipment purchase commitments that it had previously paid deposits towards, and disposed of certain machinery and equipment through abandonment. The Company recognized the following amounts related to impairment expense and loss (gain), net, on disposal of machinery: Year Ended December 31, 2023 2022 (in thousands) Loss, net, on disposal of machinery in scaling back manufacturing $ 1,609 $ — Loss (gain), net, on disposal of machinery within normal course of business 393 (32) Loss (gain), net, on disposal 2,002 (32) Impairment of deposits 523 — Impairment expense and loss (gain), net, on disposal of machinery $ 2,525 $ (32) |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2023 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions Keary Global ("Keary Global") owns 250,004 shares of the Company's common stock as of December 31, 2023, which Keary Global acquired upon exercise of two convertible notes during the third quarter of 2018. Keary Global and its affiliate, Keary International, are owned by one of the Company’s stockholders’ family member. In addition to being a stockholder, Keary Global and Keary International are inventory suppliers and purchasing agents for the Company overseas. The Company has entered into ongoing purchase and supply agreements with Keary Global. At December 31, 2023 and 2022, the Company has accounts payable due to Keary Global and Keary International of $5,306,000 and $4,940,000, respectively. Purchases for the years ended December 31, 2023 and 2022 from this related party were $39,595,000 and $42,978,000, respectively. See Note 4 — Joint Venture |
Employee Benefits
Employee Benefits | 12 Months Ended |
Dec. 31, 2023 | |
Retirement Benefits [Abstract] | |
Employee Benefits | Employee Benefits The Company maintains a 401(k) plan for employees who meet specific requirements. The Company matches 100% of the employees’ contributions up to 3% of each employee’s salary, 87.5% of the employees’ contributions up to 4% of each employee’s salary, and 80% of the employees’ contributions up to 5% of each employee’s salary. The Company’s portion of the contributions is expensed as incurred with a total expense of $368,000 and $345,000 for the years ended December 31, 2023 and 2022, respectively. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2023 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The provision for income taxes for the years ended December 31, 2023 and 2022, respectively, consisted of: Year Ended December 31, 2023 2022 (in thousands) Current Federal $ 8,987 $ 6,291 State 1,776 863 10,763 7,154 Deferred Federal (1,052) (502) State 93 24 (959) (478) Provision for income taxes $ 9,804 $ 6,676 Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for federal and state income tax purposes. The Company’s deferred tax assets (liabilities), calculated using effective tax rates is as follows: December 31, 2023 December 31, 2022 (in thousands) Deferred tax assets: State taxes $ 436 $ 252 Reserves 503 825 Accruals and deferred expenses 794 66 Research and development credit 40 43 Inventory 1,012 1,042 Government grant — 343 Stock based compensation 282 573 Capitalized research and development costs 1,741 1,043 Operating lease liabilities 9,140 8,452 Total deferred tax assets 13,948 12,639 Deferred tax liabilities: Fixed assets – depreciation (9,902) (10,350) Investment in Global Wells Investment Group (234) (172) Operating ROU asset (8,009) (7,273) Total deferred tax liabilities (18,145) (17,795) Net deferred tax liability $ (4,197) $ (5,156) Reconciliation of income taxes are as follows from statutory rate of 21% to the effective tax rate for the year ended December 31, 2023 and 2022, respectively: December 31, 2023 December 31, 2022 (in thousands) Income tax computed at the federal statutory rate $ 8,988 $ 6,828 State taxes, net of federal tax benefits 1,609 1,101 Noncontrolling Interest - Income not subject to tax (115) (460) Permanent items 42 31 Excess tax benefit from stock based compensation (187) (89) Research and development credit (417) (455) Others (116) (280) Provision for income taxes $ 9,804 $ 6,676 The Company may be audited by the Internal Revenue Service and various state tax authorities. Disputes may arise with these tax authorities involving issues of the timing and amount of deductions and allocations of income and expenses among various tax jurisdictions because of differing interpretations of tax laws and regulations. The Company evaluates its exposures associated with the tax filing positions and, while it believes its positions comply with applicable laws, may record liabilities based upon estimates of the ultimate outcome of these matters and the guidance provided in ASC 740. As of December 31, 2023 and 2022, the Company does not have any unrecognized tax benefit. The Company remains subject to IRS examination for the 2020 through 2022 tax years, and has received notice in February 2019 that it is under examination for years 2016 and 2017. Additionally, the Company files multiple state and local income tax returns and remains subject to examination in various of these jurisdictions for the 2019 through 2022 tax years. ASC 740, Income Taxes , provides for the recognition of deferred tax assets if realization of these assets is more-likely-than-not. In evaluating the Company’s ability to recover its deferred tax assets, the Company considers all available positive and negative evidence, including its operating results, ongoing tax planning and forecasts of future taxable income on a jurisdiction-by-jurisdiction basis. Based upon the level of historical taxable income, at this time, the Company determined that sufficient positive evidence existed to conclude that it is more likely than not there will be full utilization of the deferred tax assets in each jurisdiction. As such, as of December 31, 2023, and 2022, based on the available evidence, the Company did not record any valuation allowance. In August 2022, the Inflation Reduction Act of 2022 (the "Act") was signed into law. The Act, among other things, imposes a nondeductible 1% excise tax on the fair market value of certain stock that is "repurchased" during the taxable year by publicly traded U.S. corporations or acquired by certain of its subsidiaries. The taxable amount is reduced by the fair market value of certain issuances of stock throughout the year. The Act also imposes a 15% corporate minimum tax on the adjusted financial statement income of large corporations for taxable years beginning after December 31, 2022. We do not expect these tax law changes to have a material impact on our consolidated financial statements; however, we will continue to evaluate their impact. In March 2023, the IRS announced the Winter Storm Relief that allowed for taxpayers in California affected by severe winter storms, flooding, landslides, and mudslides to have until November 15, 2023, to file various individual and business tax returns and make tax payments. The Company took advantage of this tax relief in the current year. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies On October 5, 2023, the Company received a final and binding judgment from the Taiwan Supreme Court, dismissing its claim filed in 2020 against one of its Taiwanese vendors to return a prepayment of $1,124,000 due to the vendor's failure to deliver products under the contract. As a result, the Company recorded a write-off of the prepayment, which is included in general and administrative expense in the consolidated statement of income. In May 2023, the Company received a Notice of Investigations and Interim Measures stating that U.S. Customs and Border Protection (“CBP”) had initiated a formal investigation to determine whether the Company had evaded the anti-dumping and countervailing duty orders on lightweight thermal paper from China by transshipping the merchandise through Taiwan. The period of investigation was from January 2022 through the pendency of the investigation. On February 5, 2024, CBP issued its Notice of Determination concluding that the manufacturing procedures performed by the manufacturer in Taiwan, which the Company imported certain thermal paper products from, did not constitute substantial transformation. Based on this, the Company recorded a reserve as of December 31, 2023 and a corresponding increase in cost of goods sold in the consolidated statement of income for the year ended December 31, 2023 for estimated additional probable loss of $2,333,000 , representing the total estimated probable loss on all thermal paper imports under the investigation period minus payments already made. The Company is in the process of evaluating the CBP determination and assessing its appeal options. The amount of the final payments could differ materially from the Company's current estimate. The Company is a party to, and certain of its property is the subject of, various other pending claims and legal proceedings that routinely arise in the ordinary course of its business. Management believes that the outcome of such litigation and claims, should they arise in the future, is not likely to have a material effect on the Company’s financial position or results of income. |
Secondary Offering
Secondary Offering | 12 Months Ended |
Dec. 31, 2023 | |
Equity [Abstract] | |
Secondary Offering | Stockholder’s Equity The Company’s Certificate of Incorporation authorize both common and preferred stock. The total number of shares of all classes of stock authorized for issuance is 110,000,000 shares, par value of $0.001, with 10,000,000 designated as preferred stock and 100,000,000 designated as common stock. Each holder of common stock and preferred stock shall be entitled to one vote per share held. During the year ended December 31, 2023, the Company paid out special and regular quarterly dividend totaling $20,909,000. During the year ended December 31, 2022, the Company paid out special dividend totaling $6,964,000. Additionally, as described in Note 22 — Subsequent Events , on February 7, 2024, the Company's Board of Directors declared a quarterly cash dividend of $0.30 per share on the Company's common stock. On September 12, 2023, certain selling stockholders completed a secondary public offering of shares of the Company's common stock. The Company did not receive any of the proceeds from the sale of these shares by the selling stockholders. The Company incurred offering transaction costs of $453,000, which were recognized in general and administrative expense in the consolidated statement of income . |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2023 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events On February 7, 2024, the Company's Board of Directors declared a quarterly cash dividend of $0.30 per share on the Company's common stock, which was paid on February 29, 2024 to shareholders of record at the close of business on February 21, 2024. On February 12, 2024, the Company signed a lease agreement for a 44,000 square-foot distribution facility in Mesa, Arizona for a term of 65 months. The lease term will commence on March 16, 2024 with monthly base lease payments ranging from $42,000 to $48,000 after an initial rent abatement period. On February 29, 2024, Global Wells and one of its members (the "Selling Member") entered into a membership interest redemption agreement, under which the Selling Member sold and Global Wells purchased and redeemed all of the Selling Member's 10.8% ownership interest in Global Wells for a total cash consideration of $3,208,000, net of and tax withholding. The ownership interests and voting power of the remaining three members of Global Wells, including Lollicup, were adjusted proportionally subsequent to the redemption. Therefore, Lollicup's ownership interest increased to 15.1% and voting interest increased to 33.3%. On February 16, 2024, Global Wells made an advance cash payment of $2,325,000 to the Selling Member, with the remaining balance expected to be paid before December 31, 2024. On March 12, 2024, the Company's Compensation Committee of the Board of Directors approved a grant totaling 91,000 restricted stock units to certain key employees including the CEO and CFO. The grant date fair value of these restricted stock units was $2,674,000. The restricted stock units vest at various times between May 2024 and May 2026. On March 12, 2024, the Company and Alan Yu, CEO, entered into an amendment to his employment agreement (the “CEO Amendment”), effective as of March 12, 2024. The CEO Amendment reflects that Mr. Yu will continue in his role as Chief Executive Officer. Also pursuant to the CEO Amendment, Mr. Yu's base salary will increase to $300,000 per year. The CEO Amendment also provides that Mr. Yu will be granted 24,000 restricted stock units, as discussed above. Additionally, on March 12, 2024, the Company and Jian Guo, CFO, entered into an amendment to her employment agreement (the “CFO Amendment”), effective as of March 12, 2024. The CFO Amendment reflects that Ms. Guo will continue in her role as Chief Financial Officer. The CFO Amendment also provides that Ms. Guo will be granted 24,000 restricted stock units, as discussed above. |
Pay vs Performance Disclosure
Pay vs Performance Disclosure - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Pay vs Performance Disclosure | ||
Net income (loss) | $ 32,470 | $ 23,648 |
Insider Trading Arrangements
Insider Trading Arrangements | 3 Months Ended |
Dec. 31, 2023 | |
Trading Arrangements, by Individual | |
Rule 10b5-1 Arrangement Adopted | false |
Non-Rule 10b5-1 Arrangement Adopted | false |
Rule 10b5-1 Arrangement Terminated | false |
Non-Rule 10b5-1 Arrangement Terminated | false |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2023 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation: |
Principles of Consolidation | Principles of Consolidation: |
Noncontrolling Interests | Noncontrolling Interests: The Company consolidates its variable interest entity, Global Wells, in which the Company is the primary beneficiary. Noncontrolling interests represent third-party equity ownership interests in Global Wells. The Company recognizes noncontrolling interests as equity in the consolidated financial statements separate from the Company’s stockholders’ equity. The amount of net income attributable to noncontrolling interests is disclosed in the consolidated statements of income. Tax payments made by the Company on behalf of the noncontrolling interests are deducted from their equity balances, as shown in the consolidated statements of stockholders’ equity. |
Estimates and Assumptions | Estimates and Assumptions: Management uses estimates and assumptions in preparing financial statements in accordance with GAAP. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ materially from the estimates that were assumed in preparing the consolidated financial statements. Estimates that are significant to the consolidated financial statements include stock-based compensation, allowance for doubtful accounts and reserve for excess and obsolete inventory. |
Reporting Segments | Reporting Segments: The Company manages and evaluates its operations in one reportable segment. This segment consists of manufacturing and distribution of a broad portfolio of single-use products that are used to serve food and beverages and are available in plastic, paper, bagasse, biopolymer-based, and other compostable forms . It also consists of the distribution of certain specialty food and beverage products, such as syrup, boba, and coffee drinks, as well as restaurant and warehouse supplies. The Company’s long-lived assets are all located in the United States, and its revenues are almost entirely generated in the United States. |
Earnings per Share | Earnings per share: |
Out-of-period adjustment | Out-of-period adjustment: During the quarter ended December 31, 2023, the Company recorded an out-of-period adjustment to write-off a vendor prepayment of $1,124,000 due to the resolution of a legal contingency that should have been reflected in its quarterly financial statements for the quarter ended September 30, 2023. The Company evaluated the error and determined it was immaterial to both impacted periods. Although the full year financial statements for the year ended December 31, 2023 are not affected, the impact of the adjustment for the quarter ended December 31, 2023 was a decrease to other assets and an increase in general and administrative expenses of $1,124,000 and a tax-effected decrease to net income of $847,000. See Note 20 — Commitments and Contingencies for further discussion about this litigation. During the quarter ended December 31, 2023, the Company also recorded the following misclassification adjustments for the full year amounts within the consolidated statement of income with no impact on net income: (i) $6,440,000 of online sales third-party platform fees from net sales to selling expense, including $4,764,000 deemed to be out-of-period, (ii) $3,947,000 of certain production expenses primarily related to machinery repair and maintenance from general and administrative expenses to cost of goods sold, including $3,392,000 deemed to be out-of-period, and (iii) $2,147,000 of payroll and employee-related costs for the Company's sales team within operating expenses from general and administrative expenses to selling expenses, including $1,529,000 deemed to be out-of-period. All of the three out-of-period adjustments were recorded to correct immaterial errors in the Company's previously issued quarterly financial statements for the quarters ended March 31, June 30 and September 30, 2023. The aggregate impact of these out-of-period adjustments for the quarter ended December 31, 2023 was an increase in net sales of $4,764,000, an increase in cost of goods sold of $3,392,000, an increase in selling expenses of $6,293,000, and a decrease in general and administrative expenses of $4,921,000. These misclassification adjustments had no effect on totals for assets and liabilities, shareholders' equity, cash flows or net income for either the quarter ended December 31, 2023 or any of the previously reported quarters. Reclassification: Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications had no effect on previously reported totals for assets and liabilities, shareholders' equity, cash flows or net income. |
Cash and cash equivalents | Cash and cash equivalents: The Company considers all highly liquid investments purchased with an original maturity at the date of purchase of three months or less to be cash equivalents. At December 31, 2023 and 2022, cash and cash equivalents were comprised of cash on hand, cash deposited with banks, and cash held in certain money market fund. |
Accounts Receivable and Allowances | Accounts Receivable and Allowances: Accounts receivable consists primarily of amounts due from customers. Accounts receivable are carried at their estimated collectible amounts and are periodically evaluated for collectability based on past credit history. The Company recognizes an allowance for doubtful accounts on accounts receivable in an amount equal to the estimated expected losses net of recoveries. The Company estimates this allowance based on knowledge of the customers' financial condition, review of historical receivable and reserve trends, and other pertinent information. The Company also maintains a sales allowance primarily related to potential billing adjustments due to situations such as product returns and damages. The amount of the sales allowance is determined based on a historical transaction analysis. Any additions to the sales allowance are recorded as a reduction to net revenue. |
Inventories | Inventories: Inventories consist of raw materials, semi-finished goods, and finished goods. Inventory cost is determined using the weighted-average method and valued at lower of cost or net realizable value. The Company maintains a reserve for excess and obsolete inventory, taking into account various factors including historic usage, expected demand, anticipated sales price, and product expiration and obsolescence. |
Property and Equipment | Property and Equipment: |
Deposits | Deposits: |
Impairment of Long-lived Assets | Impairment of Long-lived Assets: The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. If such events or circumstances exist, an impairment test is performed which comprises of two steps. The first step compares the carrying amount of the asset to the sum of expected undiscounted future cash flows. If the sum of expected undiscounted future cash flows exceeds the carrying amount of the asset, no impairment is taken. If the sum of expected undiscounted future cash flows is less than the carrying amount of the asset, a second step is warranted and an impairment loss is measured as the amount by which the carrying amount of the asset exceeds its fair value calculated using the present value of estimated net future cash flows. For the years ended December 31, 2023 and 2022, management concluded that an impairment of long-lived assets was not required. |
Business Combination and Goodwill | Business Combination and Goodwill: The Company applies the acquisition method of accounting for business combinations in accordance with GAAP, which requires the Company to make use of estimates and judgments to allocate the purchase price paid for acquisitions to the fair value of the assets, including identifiable intangible assets, and liabilities acquired. Such estimates may be based on significant unobservable inputs. The Company’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Fair values are subject to refinement for up to one year after the closing date of an acquisition as information relative to closing date fair values becomes available. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings. |
Government Grants | Government Grants: |
Derivative Instruments | Derivative Instruments: Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 815, Derivatives and Hedging , requires companies to recognize all of its derivative instruments as either assets or liabilities in the balance sheet at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, a company must designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign operation. For derivative instruments not designated as hedging instruments, the gain or loss is recognized in the statement of income during the current period. In June 2019, Global Wells entered into an interest rate swap to manage interest rate risk, and accounted for such interest rate swap as a derivative instrument under ASC 815. In June 2022, Global Wells terminated this interest rate swap. The interest rate swap was not designated for hedge accounting and as such, changes in the fair value of the interest rate swap were recognized as interest income during the year ended December 31, 2022. See Note 11 — Interest Rate Swap for additional information on the interest rate swap and the related termination. |
Variable Interest Entities | Variable Interest Entities: The Company has a variable interest in Global Wells. In 2017, Lollicup along with three other unrelated parties formed Global Wells. Lollicup has a 13.5% ownership interest and a 25% voting interest in Global Wells, located in Rockwall, Texas. The purpose of this entity is to own, construct, and manage warehouses and manufacturing facilities. Global Wells’ operating agreement may require its members to make additional contributions only upon the unanimous decision of the members or where the cash in Global Wells’ bank account falls below $50,000. In the event that a member is unable to make an additional capital contribution, the other members will be required to make contributions to offset the amount that member cannot contribute, up to $25,000. Global Wells was determined to be a variable interest entity in accordance with ASC Topic 810, Consolidations , however, at the time the investment was made, it was determined that Lollicup was not the primary beneficiary. In 2018, Lollicup entered into an operating lease with Global Wells (“Texas Lease”). In 2020, the Company entered into another operating lease with Global Wells (“New Jersey Lease”). Upon entering into the Texas Lease with Lollicup on March 23, 2018, it was determined that Lollicup holds current and potential rights that give it the power to direct activities of Global Wells that most significantly impact Global Wells’ economic performance, the ability to receive significant benefits, and the obligation to absorb potentially significant losses, resulting in Lollicup having a controlling financial interest in Global Wells. As a result, Lollicup was deemed to be the primary beneficiary of Global Wells and has consolidated Global Wells under the risk and reward model of ASC 810, for the period from March 23, 2018. The monthly lease payments for both the Texas Lease and New Jersey Lease are eliminated upon consolidation. Assets recognized as a result of consolidating Global Wells do not represent additional assets that could be used to satisfy claims against the Company’s general assets. Conversely, liabilities recognized as a result of consolidating Global Wells do not represent additional claims of the Company’s general assets; rather they represent claims against the specific assets of Global Wells. See Note 10 — Long Term Debt |
Revenue Recognition | Revenue Recognition: National and regional chains revenue: National and regional chains revenue is derived from chain restaurants and businesses with locations across multiple states. Revenue from transactions with national and regional chains is recognized at a point in time upon transfer of control of promised products to customers. Transfer of control typically occurs when the title and risk of loss passes to the customer. Shipping terms generally indicate when the title and risk of loss have passed, which is generally when the products are shipped from the Company’s facility to the customers. • Distributors revenue: Distributors revenues are derived from national and regional distributors across the U.S. that purchase the Company’s products for resale and distribution to other businesses such as restaurants, supermarkets, offices, and schools. Revenue from distributions is recognized at a point in time upon transfer of control of promised products to customers. Transfer of control typically occurs when the title and risk of loss passes to the customer. Shipping terms generally indicate when the title and risk of loss have passed, which is generally when the products are shipped from the Company’s facility to the customers. • Online revenue: Online revenue is derived from the Company's online storefront on www.lollicupstore.com, and other e-commerce platforms including Amazon, Walmart, eBay, and TikTok with customers largely consisting of small businesses such as small restaurants, coffee houses, bubble tea cafes, pizza parlors, and frozen yogurt shops . Revenue from online transactions is recognized at a point in time upon transfer of control of promised products to customers. Transfer of control typically occurs when the title and risk of loss passes to the customer. Shipping terms generally indicate when the title and risk of loss have passed, which is generally when the products are shipped from the Company’s facility to the customers. For online sales on third-party e-commerce platforms, the Company is the principal in the three-party arrangement and control of the products remains with the Company at all times until transferring to the end customer or upon return from the end customer. Online platform fees are recognized as selling expenses. • Retail revenue: Retail revenue is derived primarily from regional and local restaurants, coffee houses, bubble tea cafes, pizza parlors, and frozen yogurt shops. Revenue from retail transactions is recognized at a point in time upon transfer of control of promised products to customers. Transfer of control typically occurs when the title and risk of loss passes to the customer. Shipping terms generally indicate when the title and risk of loss have passed, which is generally when the products are shipped from the Company’s facility to the customers. In addition to product sales, the Company also generates revenue from logistics services which is the transportation and delivery of shipping containers from ports to local retail customers. Logistics services revenue is recognized over time due to the continuous transfer of control to the customer. As control transfers over time, revenue is recognized based on the extent of progress towards completion of the performance obligation. Logistics services revenue was $4,382,000 and $6,150,000 for the year ended December 31, 2023, and 2022, respectively. The transaction price is the amount of consideration to which the Company expects to be entitled to in exchange for transferring goods to the customer. The transaction price is allocated to each performance obligation based on the standalone or contractual selling price. Revenue is recorded based on the total estimated transaction price, which includes fixed consideration and estimates of variable consideration. Variable consideration includes estimates of returns, restocking fees, and consideration payable to customers for rebates, sales incentives, and cooperative advertisement. The Company estimates its variable consideration based on contract terms and historical experience of actual results using the expected value method. The Company’s contract liabilities consist primarily of rebates, sales incentives, consideration payable to customers for cooperative advertising, and customer deposits. As of December 31, 2023 and 2022, the rebates, sales incentives and cooperative advertising were not significant to the financial statements. Customer deposits are included in the current liabilities in the consolidated balance sheets. During the year ended December 31, 2023, and 2022, the Company recognized revenue of $1,077,000 and $1,104,000, respectively, related to customer deposits received as of the beginning of each respective year. Shipping and handling fees billed to a customer are recorded within net sales, with corresponding shipping and handling costs recorded in selling expense on the accompanying consolidated statements of income. Shipping and handling fees billed to customers are not deemed to be separate performance obligations for product sales. Shipping and handling costs included within selling expenses in the consolidated statements of income for the years ended December 31, 2023 and 2022 were $28,040,000 and $32,508,000, respectively. Sales taxes collected concurrently with revenue-producing activities and remitted to governmental authorities are excluded from revenue. |
Advertising Costs | Advertising Costs: |
Income Taxes | Income Taxes: The Company applies the provision of ASC 740, Income Taxes . Under ASC 740, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are evaluated for recoverability each reporting period by assessing all positive and negative evidence available in order to assess the need for a valuation allowance. A valuation allowance is used to reduce some or all of the deferred tax assets if, based upon the weight of available evidence, it is more likely than not that such deferred tax assets will not be realized. The Company accounts for uncertainties in income tax in accordance with ASC 740-10, Accounting for Uncertainty in Income Taxes |
Concentration of Credit Risk | Concentration of Credit Risk: Cash is maintained at financial institutions and, at times, balances exceed federally insured limits. Management believes that the credit risk related to such deposits is minimal. |
Fair Value Measurements | Fair Value Measurements: The Company follows ASC 820, Fair Value Measurements , which defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. ASC 820 establishes a hierarchy of valuation inputs based on the extent to which the inputs are observable in the marketplace. Observable inputs reflect market data obtained from sources independent of the reporting entity and unobservable inputs reflect the entity’s own assumptions about how market participants would value an asset or liability based on the best information available. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value. The three levels of inputs are as follows: Level 1 — Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date. Level 2 — Inputs that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the same term of the assets or liabilities. Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable. The Company has financial instruments classified within the fair value hierarchy, which consist of the following: • At December 31, 2023, the Company had money market accounts and certificates of deposit classified as Level 1 and Level 2, respectively, within the fair value hierarchy. The short-term investments comprise of certificates of deposits with an original maturity of longer than 90 days and are reported at their carrying value as current assets on the consolidated balance sheet. The carrying value of these short-term investments approximates fair value as they were purchased near or on December 31, 2023. • At December 31, 2022, the Company had money market accounts classified as Level 1 within the fair value hierarchy, and reported as a current asset on the consolidated balance sheet. The Company has not elected the fair value option as presented by ASC 825, Fair Value Option for Financial Assets and Financial Liabilities , for the financial assets and liabilities that are not otherwise required to be carried at fair value. Under ASC 820, material financial assets and liabilities not carried at fair value, including accounts receivable, accounts payable, related-party payable, accrued and other liabilities, other payable and borrowings under promissory notes and Line of Credit (as defined below), are reported at their carrying value. The fair value of these financial instruments was determined using Level 2 inputs. Certain long-lived non-financial assets and liabilities may be required to be measured at fair value on a nonrecurring basis in certain circumstances, including when there is evidence of impairment. These non-financial assets and liabilities may include assets acquired in a business combination or property and equipment that are determined to be impaired. As of December 31, 2023 and 2022, the Company did not have any material non-financial assets or liabilities that had been measured at fair value subsequent to initial recognition. |
Foreign Currency | Foreign Currency: |
Stock-Based Compensation | Stock-Based Compensation: The Company recognizes stock-based compensation expense related to employee stock options and restricted stock units in accordance with ASC 718, Compensation — Stock Compensation . This standard requires the Company to record compensation expense equal to the fair value of awards granted to employees and non-employees. The fair value of share-based payment awards is estimated on the grant-date using the Black-Scholes option pricing model for stock options, and the closing price of the Company's common stock on the trading day immediately prior to the grant date for restricted stock units. Key input assumptions used in the Black-Scholes option pricing model to estimate the grant date fair value of stock options include the fair value of the Company’s common stock, the expected option term, the expected volatility of the Company’s stock over the option’s expected term, the risk-free interest rate, and the Company’s expected annual dividend yield. The risk-free interest rate assumption for options granted under the 2019 Stock Incentive Plan (the "Plan") is based upon observed interest rates on the United States government securities appropriate for the expected term of the Company’s stock options. The expected term of employee stock options under the Plan represents the weighted-average period that the stock options are expected to remain outstanding. The expected term of options granted is calculated based on the “simplified method,” which estimates the expected term based on the average of the vesting period and contractual term of the stock option. The Company determines the expected volatility assumption using the frequency of daily historical prices of comparable public company’s common stock for a period equal to the expected term of the options. The dividend yield assumption for options granted under the Plan is based on the Company’s history and expectation of dividend payouts. Stock-based compensation expense is based on awards that ultimately vest. Forfeitures are accounted for as they occur. The Company has elected to treat stock-based payment awards with graded vesting schedules and time-based service conditions as separate awards and recognizes stock-based compensation expense over the requisite service period using the graded vesting attribution method. The determination of stock-based compensation is inherently uncertain and subjective and involves the application of valuation models and assumptions requiring the use of judgment. If the Company had made different assumptions, its stock-based compensation expense, and its net income could have been significantly different. |
Leases | Leases: The Company determines if an arrangement is a lease at inception. Leases are classified as either finance leases or operating leases. The Company has lease agreements for the use of facilities and vehicles, and its lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise that option. Certain lease agreements contain both lease and non-lease components. Fixed payments for non-lease components are combined with |
New and Recently Adopted Accounting Standards | New and Recently Adopted Accounting Standards: The Company is an emerging growth company as that term is used in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"), and as such, the Company have elected to take advantage of certain reduced public company reporting requirements. In addition, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards, as a result, the Company will adopt new or revised accounting standards on the relevant dates in which adoption of such standards is required for private companies. In November 2023, the FASB issued ASU 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures . The new guidance requires enhanced disclosure of significant expenses that are regularly reported to the chief operating decision maker and the nature of segment expense information used to manage operations. The new guidance is effective for all public companies for annual reporting periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company will adopt the new standard in annual reporting period beginning after December 15, 2023 and is currently evaluating the impacts of the new guidance on its disclosure within the consolidated financial statements. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) : Improvements to Income Tax Disclosures . The new guidance requires disaggregated information about the effective tax rate reconciliation and additional information on taxes paid that meet a quantitative threshold. The new guidance is effective for public companies for annual reporting periods beginning after December 15, 2024, and for non-public companies for annual reporting periods beginning after December 15, 2025, with early adoption permitted for both. The Company will adopt the new standard in annual reporting period beginning after December 15, 2025 and is currently evaluating the impacts of the new guidance on its disclosures within the consolidated financial statements. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Accounting Policies [Abstract] | |
Schedule of Estimated Useful Life of Property and Equipment | The estimated useful life of property and equipment are as follows: Machinery and equipment 5 years to 15 years Leasehold improvements Lesser of useful life or lease term Vehicles 5 years Furniture and fixtures 7 years Building and building improvements 10 years to 40 years Property held under capital leases 3 years to 5 years Computer hardware and software 3 years |
Schedule of Net Sales Disaggregated by Customer Type | For the years ended December 31, 2023 and 2022, net sales disaggregated by customer type consist of the amounts shown below. Year Ended December 31, 2023 2022 (in thousands) National and regional chains $ 89,655 $ 95,786 Distributors 228,316 242,285 Online 61,265 53,697 Retail 26,415 31,189 $ 405,651 $ 422,957 |
Schedule of Concentration of Credit Risk | For the years ended December 31, 2023 and 2022, purchases from the following vendor makes up greater than 10 percent of total purchases: Year Ended December 31, 2023 2022 Keary Global Ltd. (“Keary Global”) and its affiliate, Keary International, Ltd. – related parties 13 % 11 % Amounts due to the following vendors at December 31, 2023 and 2022, respectively, that exceed 10 percent of total accounts payable are as follows: December 31, 2023 December 31, 2022 Keary Global and its affiliate, Keary International – related parties 22 % 21 % Fuling Technology Co., Ltd. 16 % 18 % Wen Ho Industrial Co., Ltd 14 % * * Amounts payable represented less than 10% of total accounts payable. |
Schedule of Fair Value Measurements by level for the Assets and Liabilities Measured at Fair Value on a Recurring Basis | The following table summarizes the Company’s fair value measurements by level at December 31, 2023 for the assets measured at fair value on a recurring basis: Level 1 Level 2 Level 3 (in thousands) Cash equivalents $ 5,956 $ 10,000 $ — Short-term investments — 26,343 — Fair value, December 31, 2023 $ 5,956 $ 36,343 $ — The following table summarizes the Company’s fair value measurements by level at December 31, 2022 for the assets measured at fair value on a recurring basis: Level 1 Level 2 Level 3 (in thousands) Cash equivalents $ 10,609 $ — $ — Fair value, December 31, 2022 $ 10,609 $ — $ — |
Schedule of Carrying Values and Estimated Fair Values of Debt | The following is a summary of the carrying amount and estimated fair value of the $23,000,000 and $28,700,000 term loans that mature in September 2026 and July 2027, respectively (the "2026 Term Loan" and "2027 Term Loan," respectively): December 31, 2023 Carrying Amount Estimated Fair Value (in thousands) 2026 Term Loan $ 21,490 $ 19,999 2027 Term Loan 28,028 27,810 $ 49,518 $ 47,809 December 31, 2022 Carrying Amount Estimated Fair Value (in thousands) 2026 Term Loan $ 22,168 $ 20,115 2027 Term Loan 20,563 18,918 $ 42,731 $ 39,033 |
Global Wells (Tables)
Global Wells (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Business Combination and Asset Acquisition [Abstract] | |
Schedule of Variable Interest Entity Financial Information | The following financial information includes assets and liabilities of Global Wells and are included in the accompanying consolidated balance sheets, except for those that eliminate upon consolidation: December 31, 2023 December 31, 2022 (in thousands) Cash $ 13,566 $ 2,022 Accounts receivable — 53 Prepaid expenses and other current assets 558 191 Due from Lollicup USA Inc. — 4,700 Property and equipment, net 44,185 45,399 Other assets 3,240 4,262 Total assets 61,549 56,627 Accounts payable $ 63 $ 2 Accrued expenses 591 626 Customer deposits 116 165 Due to Lollicup USA Inc. 14 — Other payable 1,302 — Long-term debt, current portion 1,122 957 Long-term debt, net of current portion 48,396 41,558 Other liabilities — 1,302 Total liabilities $ 51,604 $ 44,610 |
Inventories (Tables)
Inventories (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventories | Inventories consist of the following: December 31, 2023 December 31, 2022 (in thousands) Raw materials $ 9,116 $ 18,061 Semi-finished goods 1,343 1,850 Finished goods 61,419 52,044 Subtotal 71,878 71,955 Less: inventory reserve (350) (749) Total inventories $ 71,528 $ 71,206 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property and Equipment, Net | December 31, 2023 December 31, 2022 (in thousands) Machinery and equipment $ 67,321 $ 70,234 Leasehold improvements 19,085 19,063 Vehicles 7,038 6,725 Furniture and fixtures 1,015 1,016 Building 38,503 36,599 Land 11,907 11,907 Computer hardware and software 93 593 144,962 146,137 Less: accumulated depreciation and amortization (49,736) (50,569) Total property and equipment, net $ 95,226 $ 95,568 |
Goodwill (Tables)
Goodwill (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Goodwill | The following table summarizes the activity in the Company's goodwill from December 31, 2021 to December 31, 2023: (in thousands) Balance at December 31, 2021 $ 3,510 Goodwill acquired — Balance at December 31, 2022 $ 3,510 Goodwill acquired — Balance at December 31, 2023 $ 3,510 |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Payables and Accruals [Abstract] | |
Schedule of Accrued Expense Liabilities | Accrued expenses consist of the following: December 31, 2023 December 31, 2022 (in thousands) Accrued miscellaneous expenses $ 1,271 $ 513 Accrued payroll 1,685 2,327 Accrued ocean freight and other import costs 3,513 392 Accrued sale and use taxes 1,006 992 Accrued professional services fees 845 600 Accrued vacation and sick pay 619 543 Accrued property tax 552 1,164 Accrued shipping expenses 525 1,918 Accrued sales discount expense 487 448 Accrued interest expense 73 108 Total accrued expenses $ 10,576 $ 9,005 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Debt Disclosure [Abstract] | |
Schedule of Long-Term Debt | Long-term debt consists of the following: December 31, 2023 December 31, 2022 (in thousands) The 2026 Term Loan, with an initial balance of $16,115,000 and an option to request for additional advances up to a maximum of $6,885,000 through September 2022, which the Company exercised in February 2022. Interest accrues at a fixed rate of 3.5% per annum. Principal and interest payments of $116,000 are due monthly throughout the term of the loan, with the remaining principal balance due at maturity. The loan is collateralized by substantially all of Global Wells’ assets and is guaranteed by Global Wells and one of the Company’s stockholders. In accordance with the loan agreement, Global Wells is required to comply with certain financial covenants, including a minimum debt service coverage ratio. $ 21,555 $ 22,168 The 2027 Term Loan, with an initial balance of $20,700,000 and an option to request for additional advances up to a maximum of $8,000,000 through June 30, 2023, which the Company exercised in March 2023. Interest accrues at a fixed rate of 4.375% per annum. Prior to August 1, 2023, principal and interest payments of $104,000 are due monthly. Beginning August 1, 2023, monthly principal and interest payments increased to $144,000 for the remainder of the loan term, with the remaining principal balance due at maturity. The loan is collateralized by substantially all of Global Wells’ assets and is guaranteed by one of the Company’s stockholders. In accordance with the loan agreement, Global Wells is required to comply with certain financial covenants, including a minimum debt coverage ratio. 28,166 20,563 Long-term debt 49,721 42,731 Less: unamortized loan fees (203) (216) Less: current portion (1,122) (957) Long-term debt, net of current portion $ 48,396 $ 41,558 |
Schedule of Future Maturities | At December 31, 2023, future maturities are: (in thousands) 2024 $ 1,122 2025 1,179 2026 20,798 2027 26,622 $ 49,721 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
Schedule of Stock Option Activity | A summary of the Company’s stock option activity under the Plan for the years ended December 31, 2023 and 2022 is as follows: Number of Options Weighted-Average Exercise Price Weighted-Average Remaining Contract Life (In Years) Aggregate Intrinsic Value Outstanding at December 31, 2021 435,000 $ 18.76 9.7 $ 632,000 Granted 50,000 16.53 Exercised (5,000) 10.00 Forfeited (60,000) 18.86 Outstanding at December 31, 2022 420,000 $ 18.58 8.8 — Exercised (6,860) 17.84 Forfeited (26,667) 18.86 Outstanding at December 31, 2023 386,473 $ 18.58 7.8 $ 2,424 Vested and expected to vest at December 31, 2023 386,473 $ 18.58 7.8 $ 2,424 Exercisable at December 31, 2023 249,807 18.73 7.8 $ 1,528 |
Schedule of Assumptions used to Calculate Grant Date Fair Value | The assumptions that were used to calculate the grant date fair value of the Company’s stock option grants for the year ended December 31, 2022 were as follows: December 31, 2022 Risk-free interest rate 1.70 % Expected term (years) 6.25 years Volatility 30.0 % Dividend yield 0.40 % |
Schedule of Unvested Restricted Stock Unit Activity | Number of Shares Outstanding Weighted Average Grant Date Fair Value Unvested at December 31, 2021 159,000 $ 11.08 Granted 9,900 16.69 Vested (75,588) 10.72 Forfeited (11,166) 15.54 Unvested at December 31, 2022 82,146 $ 11.47 Vested (75,133) 11.13 Forfeited (1,667) 10.00 Unvested at December 31, 2023 5,346 $ 16.71 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Earnings Per Share [Abstract] | |
Schedule of Earnings Per Share | Basic earnings per share is calculated by dividing the net income attributable to equity holders of the Company for the year by the weighted average number of common shares outstanding during the period. Year Ended December 31, 2023 2022 (in thousands, except per share data) Net income attributable to Karat Packaging Inc. $ 32,470 $ 23,648 Weighted average shares 19,905 19,825 Basic earnings per share $ 1.63 $ 1.19 The following table summarizes the calculation of diluted earnings per share: Year Ended December 31, 2023 2022 (in thousands, except per share data) Net income attributable to Karat Packaging Inc. $ 32,470 $ 23,648 Weighted average shares 19,905 19,825 Dilutive shares Stock options and restricted stock units 73 101 Total dilutive shares 19,978 19,926 Diluted earnings per share $ 1.63 $ 1.19 |
Leases (Tables)
Leases (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Leases [Abstract] | |
Schedule of Lease Cost | The following table summarizes the Company's lease costs in the accompanying consolidated statement of income: Year Ended December 31, 2023 2022 (in thousands) Operating lease expense $ 6,171 $ 4,522 Short-term lease expense 314 311 Variable lease expense 1,130 817 Total lease expense $ 7,615 $ 5,650 |
Schedule of Supplemental Information Related to Operating Leases | The following table presents supplemental information related to operating leases: December 31, 2023 December 31, 2022 (in thousands, except lease term and discount rate) Weighted average remaining lease term 4.51 years 4.27 years Weighted average discount rate 6.2 % 5.3 % Right-of-use assets obtained in exchange for operating lease liabilities $ 9,995 $ 10,727 Cash paid for amounts included in measurement of lease obligations: Operating cash flows from operating leases $ 5,768 $ 4,481 |
Schedule of Future Lease Payments under Operating Leases | As of December 31, 2023, future lease payments under operating lease were as follows: (in thousands) 2024 $ 5,980 2025 5,113 2026 5,276 2027 3,993 2028 2,575 Thereafter 1,988 Total future lease payments 24,925 Less: imputed interest (3,438) Total lease liability balance $ 21,487 |
Impairment Expense and Loss (_2
Impairment Expense and Loss (Gain), Net, on Disposal of Machinery and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Discontinued Operations and Disposal Groups [Abstract] | |
Schedule of Impairment Expense and (Gain) Loss, Net, on Disposal of Machinery | The Company recognized the following amounts related to impairment expense and loss (gain), net, on disposal of machinery: Year Ended December 31, 2023 2022 (in thousands) Loss, net, on disposal of machinery in scaling back manufacturing $ 1,609 $ — Loss (gain), net, on disposal of machinery within normal course of business 393 (32) Loss (gain), net, on disposal 2,002 (32) Impairment of deposits 523 — Impairment expense and loss (gain), net, on disposal of machinery $ 2,525 $ (32) |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2023 | |
Income Tax Disclosure [Abstract] | |
Schedule of Income Tax Provisions | The provision for income taxes for the years ended December 31, 2023 and 2022, respectively, consisted of: Year Ended December 31, 2023 2022 (in thousands) Current Federal $ 8,987 $ 6,291 State 1,776 863 10,763 7,154 Deferred Federal (1,052) (502) State 93 24 (959) (478) Provision for income taxes $ 9,804 $ 6,676 |
Schedule of Deferred Tax Assets and Liabilities | The Company’s deferred tax assets (liabilities), calculated using effective tax rates is as follows: December 31, 2023 December 31, 2022 (in thousands) Deferred tax assets: State taxes $ 436 $ 252 Reserves 503 825 Accruals and deferred expenses 794 66 Research and development credit 40 43 Inventory 1,012 1,042 Government grant — 343 Stock based compensation 282 573 Capitalized research and development costs 1,741 1,043 Operating lease liabilities 9,140 8,452 Total deferred tax assets 13,948 12,639 Deferred tax liabilities: Fixed assets – depreciation (9,902) (10,350) Investment in Global Wells Investment Group (234) (172) Operating ROU asset (8,009) (7,273) Total deferred tax liabilities (18,145) (17,795) Net deferred tax liability $ (4,197) $ (5,156) |
Schedule of Reconciliation of Income Taxes | Reconciliation of income taxes are as follows from statutory rate of 21% to the effective tax rate for the year ended December 31, 2023 and 2022, respectively: December 31, 2023 December 31, 2022 (in thousands) Income tax computed at the federal statutory rate $ 8,988 $ 6,828 State taxes, net of federal tax benefits 1,609 1,101 Noncontrolling Interest - Income not subject to tax (115) (460) Permanent items 42 31 Excess tax benefit from stock based compensation (187) (89) Research and development credit (417) (455) Others (116) (280) Provision for income taxes $ 9,804 $ 6,676 |
Nature of Operations (Details)
Nature of Operations (Details) | 12 Months Ended |
Dec. 31, 2023 distribution_center | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Distribution centers operated by entity | 8 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies - Narrative (Details) | 12 Months Ended |
Dec. 31, 2023 segment | |
Accounting Policies [Abstract] | |
Reportable segment | 1 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Out-of-Period Adjustment (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2023 | Dec. 31, 2022 | |
Variable Interest Entity [Line Items] | |||
General and administrative expenses | $ 66,952 | $ 66,259 | |
Net income (loss) | (32,470) | (23,648) | |
Net sales | 405,651 | 422,957 | |
Cost of goods sold | 252,608 | 290,871 | |
Selling expenses | 41,490 | 35,844 | |
Revision of Prior Period, Error Correction, Adjustment | |||
Variable Interest Entity [Line Items] | |||
General and administrative expenses | $ 4,921 | ||
Cost of goods sold | $ 879 | ||
Selling expenses | 6,293 | ||
Revision of Prior Period, Error Correction, Adjustment | Vendor Prepayment, Write-Off | |||
Variable Interest Entity [Line Items] | |||
General and administrative expenses | 1,124 | ||
Net income (loss) | $ 847 | ||
Revision of Prior Period, Error Correction, Adjustment | Reclassification Of Platform Fees | |||
Variable Interest Entity [Line Items] | |||
Net sales | 6,440 | ||
Revision of Prior Period, Error Correction, Adjustment | Out-Of-Period Adjustment - Reclassification Of Platform Fees | |||
Variable Interest Entity [Line Items] | |||
Net sales | 4,764 | ||
Revision of Prior Period, Error Correction, Adjustment | Reclassification Of Production Expenses | |||
Variable Interest Entity [Line Items] | |||
Cost of goods sold | 3,947 | ||
Revision of Prior Period, Error Correction, Adjustment | Out-Of-Period Adjustment - Reclassification Of Production Expenses | |||
Variable Interest Entity [Line Items] | |||
Cost of goods sold | 3,392 | ||
Revision of Prior Period, Error Correction, Adjustment | Reclassification Of Employee-Related Costs | |||
Variable Interest Entity [Line Items] | |||
General and administrative expenses | 2,147 | ||
Revision of Prior Period, Error Correction, Adjustment | Out-Of-Period Adjustment - Reclassification Of Employee-Related Costs | |||
Variable Interest Entity [Line Items] | |||
General and administrative expenses | $ 1,529 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Estimated Useful Life (Details) | Dec. 31, 2023 |
Vehicles | |
Property, Plant and Equipment [Line Items] | |
Estimated useful life of property and equipment (in years) | 5 years |
Furniture and fixtures | |
Property, Plant and Equipment [Line Items] | |
Estimated useful life of property and equipment (in years) | 7 years |
Computer hardware and software | |
Property, Plant and Equipment [Line Items] | |
Estimated useful life of property and equipment (in years) | 3 years |
Minimum | Machinery and equipment | |
Property, Plant and Equipment [Line Items] | |
Estimated useful life of property and equipment (in years) | 5 years |
Minimum | Building and building improvements | |
Property, Plant and Equipment [Line Items] | |
Estimated useful life of property and equipment (in years) | 10 years |
Minimum | Property held under capital leases | |
Property, Plant and Equipment [Line Items] | |
Estimated useful life of property and equipment (in years) | 3 years |
Maximum | Machinery and equipment | |
Property, Plant and Equipment [Line Items] | |
Estimated useful life of property and equipment (in years) | 15 years |
Maximum | Building and building improvements | |
Property, Plant and Equipment [Line Items] | |
Estimated useful life of property and equipment (in years) | 40 years |
Maximum | Property held under capital leases | |
Property, Plant and Equipment [Line Items] | |
Estimated useful life of property and equipment (in years) | 5 years |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Capitalized and Depreciated (Details) | 12 Months Ended | |
Dec. 31, 2023 USD ($) reporting_unit | Dec. 31, 2022 USD ($) | |
Business Combination, Goodwill [Abstract] | ||
Reporting unit | reporting_unit | 1 | |
Impairments of goodwill | $ 0 | $ 0 |
Government Grants | ||
Cumulative grants | 1,500,000 | 1,350,000 |
Global Wells | ||
Government Grants | ||
Cumulative grants | $ 1,302,000 | $ 1,302,000 |
Summary of Significant Accoun_8
Summary of Significant Accounting Policies - Global Wells (Details) - Global Wells $ in Thousands | 12 Months Ended |
Dec. 31, 2017 USD ($) | |
Variable Interest Entity [Line Items] | |
Ownership interest (as a percent) | 13.50% |
Voting interest (as a percent) | 25% |
Minimum bank account to make additional contributions from members | $ 50 |
Contributions to offset the amount that member cannot contribute (up to) | $ 25 |
Summary of Significant Accoun_9
Summary of Significant Accounting Policies - Revenue Recognition (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Disaggregation of Revenue [Line Items] | ||
Net sales | $ 405,651 | $ 422,957 |
Revenue recognized | 1,077 | 1,104 |
Cost of goods sold | 252,608 | 290,871 |
Selling expenses | ||
Disaggregation of Revenue [Line Items] | ||
Cost of goods sold | 28,040 | 32,508 |
National and regional chains | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 89,655 | 95,786 |
Distributors | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 228,316 | 242,285 |
Online | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 61,265 | 53,697 |
Retail | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | 26,415 | 31,189 |
Logistics Services | ||
Disaggregation of Revenue [Line Items] | ||
Net sales | $ 4,382 | $ 6,150 |
Summary of Significant Accou_10
Summary of Significant Accounting Policies - Advertising Costs and Income Taxes (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Marketing and Advertising Expense [Abstract] | ||
Advertising costs | $ 4,865 | $ 2,418 |
Summary of Significant Accou_11
Summary of Significant Accounting Policies - Concentration of Credit Risk (Details) - Supplier | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Purchases | Keary Global and its affiliate, Keary International – related parties | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 13% | 11% |
Accounts payable | Keary Global and its affiliate, Keary International – related parties | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 22% | 21% |
Accounts payable | Fuling Technology Co., Ltd. | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 16% | 18% |
Accounts payable | Wen Ho Industrial Co., Ltd | ||
Concentration Risk [Line Items] | ||
Concentration risk percentage | 14% |
Summary of Significant Accou_12
Summary of Significant Accounting Policies - Fair Value Measurements (Details) - USD ($) $ in Thousands | Dec. 31, 2023 | Dec. 31, 2022 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Short-term investments | $ 26,343 | $ 0 |
Recurring basis | Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash equivalents | 5,956 | 10,609 |
Short-term investments | 0 | |
Fair value | 5,956 | 10,609 |
Recurring basis | Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash equivalents | 10,000 | 0 |
Short-term investments | 26,343 | |
Fair value | 36,343 | 0 |
Recurring basis | Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash equivalents | 0 | 0 |
Short-term investments | 0 | |
Fair value | $ 0 | $ 0 |
Summary of Significant Accou_13
Summary of Significant Accounting Policies - Summary of Carrying Values and Estimated Fair Values of Debt (Details) - USD ($) | Dec. 31, 2023 | Dec. 31, 2022 |
Debt Instrument [Line Items] | ||
Carrying Amount | $ 49,721,000 | $ 42,731,000 |
Reported Value Measurement | ||
Debt Instrument [Line Items] | ||
Carrying Amount | 49,518,000 | 42,731,000 |
Estimated Fair Value | 47,809,000 | 39,033,000 |
Term Loan Maturing 2026 | ||
Debt Instrument [Line Items] | ||
Face amount of loan | 23,000,000 | |
Term Loan Maturing 2026 | Reported Value Measurement | ||
Debt Instrument [Line Items] | ||
Carrying Amount | 21,490,000 | 22,168,000 |
Estimated Fair Value | 19,999,000 | 20,115,000 |
Term Loan Maturing 2027 | ||
Debt Instrument [Line Items] | ||
Face amount of loan | 28,700,000 | |
Term Loan Maturing 2027 | Reported Value Measurement | ||
Debt Instrument [Line Items] | ||
Carrying Amount | 28,028,000 | 20,563,000 |
Estimated Fair Value | $ 27,810,000 | $ 18,918,000 |
Summary of Significant Accou_14
Summary of Significant Accounting Policies - Foreign Currency (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Foreign Currency | ||
Gain on foreign currency transactions | $ 103 | $ 1,568 |
Global Wells - Assets and Liabi
Global Wells - Assets and Liabilities of Global Wells (Details) - USD ($) $ in Thousands | Dec. 31, 2023 | Dec. 31, 2022 |
Variable Interest Entity [Line Items] | ||
Cash | $ 23,076 | $ 16,041 |
Accounts receivable | 27,763 | 29,912 |
Prepaid expenses and other current assets | 6,219 | 6,641 |
Property and equipment, net | 95,226 | 95,568 |
Other assets | 619 | 818 |
Total assets | 276,397 | 252,175 |
Accrued expenses | 10,576 | 9,005 |
Other payable | 3,200 | 0 |
Long-term debt, current portion | 1,122 | 957 |
Long-term debt, net of current portion | 48,396 | 41,558 |
Other liabilities | 26 | 2,652 |
Total liabilities | 113,707 | 100,242 |
Nonrelated Party | ||
Variable Interest Entity [Line Items] | ||
Accounts payable | 18,446 | 18,559 |
Related Party | ||
Variable Interest Entity [Line Items] | ||
Accounts payable | 5,306 | 4,940 |
Global Wells | ||
Variable Interest Entity [Line Items] | ||
Cash | 13,566 | 2,022 |
Accounts receivable | 0 | 53 |
Prepaid expenses and other current assets | 558 | 191 |
Due from Lollicup USA Inc. | 0 | 4,700 |
Property and equipment, net | 44,185 | 45,399 |
Other assets | 3,240 | 4,262 |
Total assets | 61,549 | 56,627 |
Accrued expenses | 591 | 626 |
Customer deposits | 116 | 165 |
Other payable | 1,302 | 0 |
Long-term debt, current portion | 1,122 | 957 |
Long-term debt, net of current portion | 48,396 | 41,558 |
Other liabilities | 0 | 1,302 |
Total liabilities | 51,604 | 44,610 |
Global Wells | Nonrelated Party | ||
Variable Interest Entity [Line Items] | ||
Accounts payable | 63 | 2 |
Global Wells | Related Party | ||
Variable Interest Entity [Line Items] | ||
Accounts payable | $ 14 | $ 0 |
Global Wells - Narrative (Detai
Global Wells - Narrative (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Business Acquisition [Line Items] | ||
Net income | $ 33,180 | $ 25,837 |
Global Wells | ||
Business Acquisition [Line Items] | ||
Net income | 3,956 | |
Lollicup Franchising, LLC | ||
Business Acquisition [Line Items] | ||
Net income | $ 504 |
Joint Venture (Details)
Joint Venture (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | ||||
Mar. 31, 2023 | Dec. 31, 2023 | Dec. 31, 2022 | Jun. 30, 2023 | May 08, 2023 | Apr. 06, 2022 | |
Schedule of Equity Method Investments [Line Items] | ||||||
Deposits paid for joint venture investment | $ 2,900 | $ 5,876 | ||||
Deposits refunded from joint venture investment | $ 6,900 | 1,876 | ||||
Bio Earth Technology | ||||||
Schedule of Equity Method Investments [Line Items] | ||||||
Deposits paid for joint venture investment | $ 2,900 | 5,876 | ||||
Deposits refunded from joint venture investment | $ 900 | $ 1,876 | ||||
Bio Earth Technology | Lollicup Franchising, LLC | ||||||
Schedule of Equity Method Investments [Line Items] | ||||||
Ownership percentage by parent | 49% | |||||
Bio Earth Technology | Lollicup Franchising, LLC | ||||||
Schedule of Equity Method Investments [Line Items] | ||||||
Committed capital to joint venture | $ 6,500 | |||||
Keary Global | ||||||
Schedule of Equity Method Investments [Line Items] | ||||||
Noncontrolling interest in joint ventures | $ 6,100 | $ 6,100 | ||||
Noncontrolling interest in joint ventures, gross | $ 6,000 | |||||
Keary Global | Bio Earth Technology | ||||||
Schedule of Equity Method Investments [Line Items] | ||||||
Ownership percentage by parent | 5% |
Inventories - Schedule of Inven
Inventories - Schedule of Inventories (Details) - USD ($) $ in Thousands | Dec. 31, 2023 | Dec. 31, 2022 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 9,116 | $ 18,061 |
Semi-finished goods | 1,343 | 1,850 |
Finished goods | 61,419 | 52,044 |
Subtotal | 71,878 | 71,955 |
Less: inventory reserve | (350) | (749) |
Total inventories | $ 71,528 | $ 71,206 |
Inventories - Narrative (Detail
Inventories - Narrative (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Inventory [Line Items] | ||
Write-off of inventory | $ 3,897 | $ 3,470 |
Adjustments to inventory reserve | (399) | 6 |
Cost of goods sold | 252,608 | 290,871 |
Cost of Sales | ||
Inventory [Line Items] | ||
Raw materials | $ 1,710 | |
Revision of Prior Period, Error Correction, Adjustment | ||
Inventory [Line Items] | ||
Adjustments to inventory reserve | 3,470 | |
Cost of goods sold | $ 879 |
Property and Equipment - Schedu
Property and Equipment - Schedule of Property and Equipment, Net (Details) - USD ($) $ in Thousands | Dec. 31, 2023 | Dec. 31, 2022 |
Property, Plant and Equipment, Net, by Type [Abstract] | ||
Property and equipment, gross | $ 144,962 | $ 146,137 |
Less: accumulated depreciation and amortization | (49,736) | (50,569) |
Total property and equipment, net | 95,226 | 95,568 |
Machinery and equipment | ||
Property, Plant and Equipment, Net, by Type [Abstract] | ||
Property and equipment, gross | 67,321 | 70,234 |
Leasehold improvements | ||
Property, Plant and Equipment, Net, by Type [Abstract] | ||
Property and equipment, gross | 19,085 | 19,063 |
Vehicles | ||
Property, Plant and Equipment, Net, by Type [Abstract] | ||
Property and equipment, gross | 7,038 | 6,725 |
Furniture and fixtures | ||
Property, Plant and Equipment, Net, by Type [Abstract] | ||
Property and equipment, gross | 1,015 | 1,016 |
Building | ||
Property, Plant and Equipment, Net, by Type [Abstract] | ||
Property and equipment, gross | 38,503 | 36,599 |
Land | ||
Property, Plant and Equipment, Net, by Type [Abstract] | ||
Property and equipment, gross | 11,907 | 11,907 |
Computer hardware and software | ||
Property, Plant and Equipment, Net, by Type [Abstract] | ||
Property and equipment, gross | $ 93 | $ 593 |
Property and Equipment - Narrat
Property and Equipment - Narrative (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
General and Administrative Expense | ||
Property, Plant and Equipment [Line Items] | ||
Depreciation and amortization expense | $ 3,981,000 | $ 4,491,000 |
Cost of Sales | ||
Property, Plant and Equipment [Line Items] | ||
Depreciation and amortization expense | $ 6,776,000 | $ 5,887,000 |
Goodwill - Schedule of Goodwill
Goodwill - Schedule of Goodwill (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Goodwill [Roll Forward] | ||
Goodwill, beginning balance | $ 3,510 | $ 3,510 |
Goodwill acquired | 0 | 0 |
Goodwill, ending balance | $ 3,510 | $ 3,510 |
Line of Credit (Details)
Line of Credit (Details) - USD ($) | Mar. 14, 2023 | Dec. 31, 2023 | Jun. 20, 2023 | Dec. 31, 2022 | Aug. 18, 2022 | Feb. 23, 2018 |
Line of credit | ||||||
Line of Credit Facility [Line Items] | ||||||
Maximum borrowing capacity | $ 36,234,000 | $ 38,930,000 | $ 40,000,000 | |||
Floor rate (as a percent) | 3.25% | |||||
Standby letter of credit | ||||||
Line of Credit Facility [Line Items] | ||||||
Maximum borrowing capacity | $ 5,000,000 | $ 2,000,000 | ||||
Long-term line of credit, noncurrent | $ 3,766,000 | $ 1,070,000 | ||||
Prime Rate | Line of credit | ||||||
Line of Credit Facility [Line Items] | ||||||
Spread on variable rate (as a percent) | 0.25% | |||||
SOFR | ||||||
Line of Credit Facility [Line Items] | ||||||
Interest rate | 2.50% | |||||
Floor interest rate | 1% |
Accrued Expenses (Details)
Accrued Expenses (Details) - USD ($) $ in Thousands | Dec. 31, 2023 | Dec. 31, 2022 |
Payables and Accruals [Abstract] | ||
Accrued miscellaneous expenses | $ 1,271 | $ 513 |
Accrued payroll | 1,685 | 2,327 |
Accrued ocean freight and other import costs | 3,513 | 392 |
Accrued sale and use taxes | 1,006 | 992 |
Accrued professional services fees | 845 | 600 |
Accrued vacation and sick pay | 619 | 543 |
Accrued property tax | 552 | 1,164 |
Accrued shipping expenses | 525 | 1,918 |
Accrued sales discount expense | 487 | 448 |
Accrued interest expense | 73 | 108 |
Total accrued expenses | $ 10,576 | $ 9,005 |
Long-Term Debt - Schedule of Lo
Long-Term Debt - Schedule of Long-term Debt (Details) - USD ($) $ in Thousands | 12 Months Ended | |||
Aug. 01, 2023 | Jul. 31, 2023 | Dec. 31, 2023 | Dec. 31, 2022 | |
Debt Instrument [Line Items] | ||||
Carrying Amount | $ 49,721 | $ 42,731 | ||
Less: unamortized loan fees | (203) | (216) | ||
Less: current portion | (1,122) | (957) | ||
Long-term debt, net of current portion | 48,396 | 41,558 | ||
Term Loan, Maturing September 30, 2026 | ||||
Debt Instrument [Line Items] | ||||
Carrying Amount | 21,555 | 22,168 | ||
Amount converted to term loan | 16,115 | |||
Term loan, accordion feature | $ 6,885 | |||
Fixed interest rate (as a percent) | 3.50% | |||
Monthly principal and interest payments | $ 116 | |||
Term Loan Maturing July 01, 2027 | ||||
Debt Instrument [Line Items] | ||||
Carrying Amount | 28,166 | $ 20,563 | ||
Amount converted to term loan | 20,700 | |||
Term loan, accordion feature | $ 8,000 | |||
Fixed interest rate (as a percent) | 4.375% | |||
Monthly principal and interest payments | $ 144 | $ 104 |
Long-Term Debt - Schedule of Fu
Long-Term Debt - Schedule of Future Maturities (Details) - USD ($) $ in Thousands | Dec. 31, 2023 | Dec. 31, 2022 |
Future maturities: | ||
2024 | $ 1,122 | |
2025 | 1,179 | |
2026 | 20,798 | |
2027 | 26,622 | |
Long-term debt | $ 49,721 | $ 42,731 |
Long-Term Debt - Narrative (Det
Long-Term Debt - Narrative (Details) | Jun. 30, 2022 USD ($) |
Term Loan, Maturing May 2029 | |
Debt Instrument [Line Items] | |
Face amount of loan | $ 21,580,000 |
Interest Rate Swaps (Details)
Interest Rate Swaps (Details) - USD ($) $ in Thousands | 1 Months Ended | 12 Months Ended | ||
Jun. 30, 2022 | Dec. 31, 2023 | Dec. 31, 2022 | Jun. 13, 2019 | |
Derivative [Line Items] | ||||
Proceeds from settlement of interest rate swap (including $0 and $825 associated with variable interest entity for the year ended December 31, 2023 and 2022, respectively) | $ 0 | $ 825 | ||
Global Wells | Interest Rate Swap | ||||
Derivative [Line Items] | ||||
Term of contract (in years) | 10 years | |||
Proceeds from settlement of interest rate swap (including $0 and $825 associated with variable interest entity for the year ended December 31, 2023 and 2022, respectively) | $ 825 | |||
Notional value | $ 21,580 | |||
Fixed interest rate (as a percent) | 5.10% | |||
Derivative interest income (expense) | $ 2,159 |
Stockholder_s Equity (Details)
Stockholder’s Equity (Details) $ / shares in Units, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2023 USD ($) vote $ / shares shares | Dec. 31, 2022 USD ($) $ / shares shares | Feb. 07, 2024 $ / shares | |
Schedule of Capitalization, Equity [Line Items] | |||
Shares authorized (in shares) | shares | 110,000,000 | ||
Preferred stock, par value (in dollars per share) | $ / shares | $ 0.001 | $ 0.001 | |
Common stock, par value (in dollars per share) | $ / shares | $ 0.001 | $ 0.001 | |
Preferred stock, shares authorized (in shares) | shares | 10,000,000 | 10,000,000 | |
Common stock, shares authorized (in shares) | shares | 100,000,000 | 100,000,000 | |
Votes per share held | vote | 1 | ||
Cash dividends declared ($1.05 per share) | $ | $ 20,909 | $ 6,964 | |
Subsequent Event | |||
Schedule of Capitalization, Equity [Line Items] | |||
Ordinary share per dividend (in dollars per share) | $ / shares | $ 0.30 |
Stock-Based Compensation - Narr
Stock-Based Compensation - Narrative (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Jan. 31, 2019 | |
Stock-based Compensation | |||
Shares reserved for issuance (in shares) | 1,350,684 | 2,000,000 | |
Stock-based compensation expense | $ 770,000 | $ 2,047,000 | |
Tax benefit, share-based payment arrangement, amount | 187,000 | $ 89,000 | |
Remaining stock-based compensation expense for unvested stock options | 183,000 | ||
Stock options, weighted-average grant-date fair value (in dollars per share) | $ 5.18 | ||
Remaining stock-based compensation expense for unvested restricted stock units | $ 15,000 | ||
Share-based Payment Arrangement, Option | |||
Stock-based Compensation | |||
Vesting period (in years) | 3 years | ||
Cost not yet recognized, period for recognition (in years) | 9 months 18 days | ||
Restricted Stock Units (RSUs) | |||
Stock-based Compensation | |||
Vesting period (in years) | 3 years | ||
Cost not yet recognized, period for recognition (in years) | 9 months 18 days | ||
Granted (in shares) | 9,900 | ||
Granted (in dollars per share) | $ 16.69 | ||
Fair value on vesting date | $ 1,612,000 | $ 1,156,000 | |
Maximum | |||
Stock-based Compensation | |||
Award term (in years) | 10 years | ||
Incentive Stock Optionee, Stock Ownership Greater than Ten Percent of Voting Power | |||
Stock-based Compensation | |||
Minimum exercise price to fair market value of common stock at the date of grant (as a percent) | 110% | ||
Incentive Stock Optionee, Stock Ownership Greater than Ten Percent of Voting Power | Maximum | |||
Stock-based Compensation | |||
Award term (in years) | 5 years |
Stock-Based Compensation - Sche
Stock-Based Compensation - Schedule of Stock Options Activity (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2021 | |
Number of Options | |||
Outstanding at beginning of period (in shares) | 420,000 | 435,000 | |
Granted (in shares) | 50,000 | ||
Exercised (in shares) | (6,860) | (5,000) | |
Forfeited (in shares) | (26,667) | (60,000) | |
Outstanding at end of period (in shares) | 386,473 | 420,000 | 435,000 |
Number of options, expected to vest (in shares) | 386,473 | ||
Number of options, exercisable (in shares) | 249,807 | ||
Weighted-Average Exercise Price | |||
Outstanding at beginning of period (in dollars per share) | $ 18.58 | $ 18.76 | |
Granted (in dollars per share) | 16.53 | ||
Exercised (in dollars per share) | 17.84 | 10 | |
Forfeited (in dollars per share) | 18.86 | 18.86 | |
Outstanding at end of period (in dollars per share) | 18.58 | $ 18.58 | $ 18.76 |
Weighted average exercise price, expected to vest (in dollars per share) | 18.58 | ||
Weighted average exercise price, exercisable (in dollars per share) | $ 18.73 | ||
Stock Option Activity, Additional Disclosures | |||
Weighted average remaining contract life, options outstanding | 7 years 9 months 18 days | 8 years 9 months 18 days | 9 years 8 months 12 days |
Weighted average remaining contract life, expected to vest | 7 years 9 months 18 days | ||
Weighted average remaining contract life, exercisable | 7 years 9 months 18 days | ||
Aggregate intrinsic value, options outstanding | $ 2,424,000 | $ 0 | $ 632,000 |
Aggregate intrinsic value, expected to vest | 2,424,000 | ||
Aggregate intrinsic value, exercisable | $ 1,528,000 |
Stock-Based Compensation - Sc_2
Stock-Based Compensation - Schedule of Assumptions Used to Calculate Grant Date Fair Value (Details) | 12 Months Ended |
Dec. 31, 2022 | |
Share-Based Payment Arrangement [Abstract] | |
Risk-free interest rate | 1.70% |
Expected term (years) | 6 years 3 months |
Volatility | 30% |
Dividend yield | 0.40% |
Stock-Based Compensation - Sc_3
Stock-Based Compensation - Schedule of Unvested Restricted Stock Units (Details) - Restricted Stock Units (RSUs) - $ / shares | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Number of Shares Outstanding | ||
Outstanding at beginning of period (in shares) | 82,146 | 159,000 |
Granted (in shares) | 9,900 | |
Vested (in shares) | (75,133) | (75,588) |
Forfeited (in shares) | (1,667) | (11,166) |
Outstanding at end of period (in shares) | 5,346 | 82,146 |
Weighted Average Grant Date Fair Value | ||
Outstanding at beginning of period (in dollars per share) | $ 11.47 | $ 11.08 |
Granted (in dollars per share) | 16.69 | |
Vested (in dollars per share) | 11.13 | 10.72 |
Forfeited (in dollars per share) | 10 | 15.54 |
Outstanding at end of period (in dollars per share) | $ 16.71 | $ 11.47 |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Earnings Per Share Reconciliation [Abstract] | ||
Net income attributable to Karat Packaging Inc. | $ 32,470 | $ 23,648 |
Weighted average shares (in shares) | 19,904,698 | 19,824,911 |
Basic earnings per share (in dollars per share) | $ 1.63 | $ 1.19 |
Weighted Average Number of Shares Outstanding, Diluted [Abstract] | ||
Net income attributable to Karat Packaging Inc. | $ 32,470 | $ 23,648 |
Weighted average shares (in shares) | 19,904,698 | 19,824,911 |
Dilutive shares | ||
Stock options and restricted stock units (in shares) | 73,000 | 101,000 |
Total dilutive shares (in shares) | 19,977,712 | 19,925,905 |
Diluted earnings per share (in dollars per share) | $ 1.63 | $ 1.19 |
Potentially dilutive shares excluded from diluted earnings per share calculation (in shares) | 213,599 | 449,223 |
Leases - Schedule of Lease Cost
Leases - Schedule of Lease Cost (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Leases [Abstract] | ||
Operating lease expense | $ 6,171 | $ 4,522 |
Short-term lease expense | 314 | 311 |
Variable lease expense | 1,130 | 817 |
Total lease expense | $ 7,615 | $ 5,650 |
Leases - Narrative (Details)
Leases - Narrative (Details) - USD ($) $ in Thousands | 12 Months Ended | |||
Nov. 01, 2023 | Dec. 31, 2023 | Dec. 31, 2022 | Sep. 09, 2020 | |
Lessee, Lease, Description [Line Items] | ||||
Sublease Income | $ 76 | $ 0 | ||
Expected rental income in 2024 | 786 | |||
Expected rental income in 2025 | 616 | |||
Global Wells | ||||
Lessee, Lease, Description [Line Items] | ||||
Term of contract | 38 months | |||
Lease renewal term | 2 years | |||
Global Wells | Minimum | ||||
Lessee, Lease, Description [Line Items] | ||||
Monthly lease payment | $ 62 | |||
Global Wells | Maximum | ||||
Lessee, Lease, Description [Line Items] | ||||
Monthly lease payment | $ 65 | |||
Operating Expense | ||||
Lessee, Lease, Description [Line Items] | ||||
Lease expense | 6,541 | 4,574 | ||
Cost of Sales | ||||
Lessee, Lease, Description [Line Items] | ||||
Lease expense | $ 1,074 | $ 1,076 |
Leases - Schedule of Supplement
Leases - Schedule of Supplemental Information Related to Operating Leases (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Leases [Abstract] | ||
Weighted average remaining lease term (in years) | 4 years 6 months 3 days | 4 years 3 months 7 days |
Weighted average discount rate | 6.20% | 5.30% |
Right-of-use assets obtained in exchange for operating lease liabilities | $ 9,995 | $ 10,727 |
Cash paid for amounts included in measurement of lease obligations: | ||
Operating cash flows from operating leases | $ 5,768 | $ 4,481 |
Leases - Schedule of Maturities
Leases - Schedule of Maturities of Operating Lease Liabilities (Details) $ in Thousands | Dec. 31, 2023 USD ($) |
Leases [Abstract] | |
2024 | $ 5,980 |
2025 | 5,113 |
2026 | 5,276 |
2027 | 3,993 |
2028 | 2,575 |
Thereafter | 1,988 |
Total future lease payments | 24,925 |
Less: imputed interest | (3,438) |
Operating lease liability | $ 21,487 |
Impairment Expense and Loss (_3
Impairment Expense and Loss (Gain), Net, on Disposal of Machinery and Equipment (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Discontinued Operations and Disposal Groups [Abstract] | ||
Loss, net, on disposal of machinery in scaling back manufacturing | $ 1,609 | $ 0 |
Loss (gain), net, on disposal of machinery within normal course of business | 393 | (32) |
Loss (gain), net, on disposal | 2,002 | (32) |
Impairment of deposits | 523 | 0 |
Impairment expense and loss (gain), net, on disposal of machinery | $ 2,525 | $ (32) |
Related Party Transactions (Det
Related Party Transactions (Details) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Sep. 30, 2018 convertible_note | Dec. 31, 2023 USD ($) shares | Dec. 31, 2022 USD ($) shares | |
Related Party Transaction [Line Items] | |||
Common stock, shares outstanding (in shares) | shares | 19,965,482 | 19,885,005 | |
Number of exercised convertible notes | convertible_note | 2 | ||
Affiliated Entity | Keary Global | |||
Related Party Transaction [Line Items] | |||
Common stock, shares outstanding (in shares) | shares | 250,004 | ||
Accounts payable | $ 5,306 | $ 4,940 | |
Purchases from related party | 39,595 | 42,978 | |
Affiliated Entity | Keary International | |||
Related Party Transaction [Line Items] | |||
Accounts payable | 5,306 | 4,940 | |
Purchases from related party | $ 39,595 | $ 42,978 |
Employee Benefits (Details)
Employee Benefits (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Defined Contribution Plan Disclosure [Line Items] | ||
Contributions | $ 368 | $ 345 |
Tranche One | ||
Defined Contribution Plan Disclosure [Line Items] | ||
Employer matching contribution, percent of match | 100% | |
Employer matching contribution, percent of employees' gross pay | 3% | |
Tranche Two | ||
Defined Contribution Plan Disclosure [Line Items] | ||
Employer matching contribution, percent of match | 87.50% | |
Employer matching contribution, percent of employees' gross pay | 4% | |
Tranche Three | ||
Defined Contribution Plan Disclosure [Line Items] | ||
Employer matching contribution, percent of match | 80% | |
Employer matching contribution, percent of employees' gross pay | 5% |
Income Taxes - Schedule of Inco
Income Taxes - Schedule of Income Tax Provisions (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Current | ||
Federal | $ 8,987 | $ 6,291 |
State | 1,776 | 863 |
Current income tax provision | 10,763 | 7,154 |
Deferred | ||
Federal | (1,052) | (502) |
State | 93 | 24 |
Deferred income tax provision | (959) | (478) |
Provision for income taxes | $ 9,804 | $ 6,676 |
Income Taxes - Schedule of Defe
Income Taxes - Schedule of Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2023 | Dec. 31, 2022 |
Deferred tax assets: | ||
State taxes | $ 436 | $ 252 |
Reserves | 503 | 825 |
Accruals and deferred expenses | 794 | 66 |
Research and development credit | 40 | 43 |
Inventory | 1,012 | 1,042 |
Government grant | 0 | 343 |
Stock based compensation | 282 | 573 |
Capitalized research and development costs | 1,741 | 1,043 |
Operating lease liabilities | 9,140 | 8,452 |
Total deferred tax assets | 13,948 | 12,639 |
Deferred tax liabilities: | ||
Fixed assets – depreciation | (9,902) | (10,350) |
Investment in Global Wells Investment Group | (234) | (172) |
Operating ROU asset | (8,009) | (7,273) |
Total deferred tax liabilities | (18,145) | (17,795) |
Net deferred tax liability | $ (4,197) | $ (5,156) |
Income Taxes - Schedule of Reco
Income Taxes - Schedule of Reconciliation of Income Taxes (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2023 | Dec. 31, 2022 | |
Income Tax Disclosure [Abstract] | ||
Income tax computed at the federal statutory rate | $ 8,988 | $ 6,828 |
State taxes, net of federal tax benefits | 1,609 | 1,101 |
Noncontrolling Interest - Income not subject to tax | (115) | (460) |
Permanent items | 42 | 31 |
Excess tax benefit from stock based compensation | (187) | (89) |
Research and development credit | (417) | (455) |
Others | (116) | (280) |
Provision for income taxes | $ 9,804 | $ 6,676 |
Income Taxes - Narrative (Detai
Income Taxes - Narrative (Details) | Dec. 31, 2023 USD ($) |
Income Tax Disclosure [Abstract] | |
Deferred tax assets, valuation allowance | $ 0 |
Commitment and Contingencies (D
Commitment and Contingencies (Details) - USD ($) $ in Thousands | Oct. 05, 2023 | Dec. 31, 2023 |
Commitments and Contingencies Disclosure [Abstract] | ||
Returned amount to vender | $ 1,124 | |
Loss contingency | $ 2,333 |
Secondary Offering (Details)
Secondary Offering (Details) $ in Thousands | Sep. 12, 2023 USD ($) |
Equity [Abstract] | |
Offering transaction costs | $ 453 |
Subsequent Events (Details)
Subsequent Events (Details) $ / shares in Units, ft² in Thousands, $ in Thousands | 12 Months Ended | ||||||
Mar. 16, 2024 USD ($) | Mar. 12, 2024 USD ($) shares | Feb. 29, 2024 USD ($) | Feb. 16, 2024 USD ($) | Dec. 31, 2022 shares | Feb. 12, 2024 ft² | Feb. 07, 2024 $ / shares | |
Restricted Stock Units (RSUs) | |||||||
Subsequent Event [Line Items] | |||||||
Granted (in shares) | shares | 9,900 | ||||||
Minimum | Forecast | |||||||
Subsequent Event [Line Items] | |||||||
Lease expense | $ 42 | ||||||
Maximum | Forecast | |||||||
Subsequent Event [Line Items] | |||||||
Lease expense | $ 48 | ||||||
Subsequent Event | |||||||
Subsequent Event [Line Items] | |||||||
Ordinary share per dividend (in dollars per share) | $ / shares | $ 0.30 | ||||||
Area of distribution facility (square foot) | ft² | 44 | ||||||
Lease term | 65 months | ||||||
Subsequent Event | Chief Executive Officer | |||||||
Subsequent Event [Line Items] | |||||||
Base salary | $ 300 | ||||||
Subsequent Event | Restricted Stock Units (RSUs) | |||||||
Subsequent Event [Line Items] | |||||||
Granted (in shares) | shares | 91,000 | ||||||
Grant date fair value | $ 2,674 | ||||||
Subsequent Event | Restricted Stock Units (RSUs) | Chief Executive Officer | |||||||
Subsequent Event [Line Items] | |||||||
Granted (in shares) | shares | 24,000 | ||||||
Subsequent Event | Restricted Stock Units (RSUs) | Chief Financial Officer | |||||||
Subsequent Event [Line Items] | |||||||
Granted (in shares) | shares | 24,000 | ||||||
Subsequent Event | Global Wells | |||||||
Subsequent Event [Line Items] | |||||||
Ownership interest (as a percent) | 15.10% | ||||||
Voting interest (as a percent) | 33.30% | ||||||
Cash consideration | $ 3,208 | $ 2,325 | |||||
Subsequent Event | Global Wells | Selling Member | |||||||
Subsequent Event [Line Items] | |||||||
Ownership interest (as a percent) | 10.80% |