Title of Each Class | Name of Each Exchange on Which Registered | |
Common Stock, no par value | NASDAQ Global Select Market |
Large accelerated filer | ý | Accelerated filer | ¨ |
Non-accelerated filer (Do not check if a smaller reporting company) | ¨ | Smaller reporting company | ¨ |
Emerging growth company | ¨ |
Class | Outstanding at August 24, 2018 | |
Common Stock, no par value per share | 25,593,917 shares |
Page | ||
Item 1. | ||
Item 1A. | ||
Item 1B. | ||
Item 2. | ||
Item 3. | ||
Item 4. | Mine Safety Disclosures | |
Item 5. | ||
Item 6. | ||
Item 7. | ||
Item 7A. | ||
Item 8. | ||
Item 9. | ||
Item 9A. | ||
Item 9B. | ||
Item 10. | ||
Item 11. | ||
Item 12. | ||
Item 13. | ||
Item 14. | ||
Item 15. | ||
Item 16. | Form 10-K Summary | |
• | Understand end-user needs |
• | Provide more complete technology solutions |
• | Offer market and technology solution expertise |
• | Offer training, education and marketing services |
• | Provide custom configuration, platforms and digital tools |
• | Deliver technical support |
• | Enable opportunities in emerging technologies |
• | Reduce working capital requirements |
• | Offer flexible financing solutions |
• | Help provide navigation and understanding of supplier programs |
• | Provide access to emerging, diverse and established customer channels |
• | Create scale and efficiency |
• | Serve small- and medium-sized businesses more efficiently |
• | Deliver more complete technology solutions |
• | Provide market insights |
• | Offer expertise and technical support |
• | Manage channel credit |
• | Create demand |
• | Worldwide Barcode, Networking & Security (“WW Barcode, Networking & Security”); and |
• | Worldwide Communications & Services (“WW Communications & Services”). |
• | We have two non-exclusive agreements with Avaya. One agreement covers the distribution of Avaya products in the United States and Latin America, and the other agreement covers distribution of Avaya products in the United Kingdom and portions of continental Europe. Our Avaya agreements each have a one year term that automatically renews for additional one year terms. Either party may terminate upon 180 days' notice for the United States and Latin America agreement and upon 90 days' notice for the European agreement. |
• | We have three non-exclusive agreements with Cisco. One agreement covers the distribution of Cisco products in the United States for our KBZ business and has a three year term; one agreement covers distribution of Cisco products in the Unites States for the rest of our business and has a two year term; and one agreement covers distribution of products in |
• | We have two non-exclusive agreements with Zebra. One agreement covers sales of Zebra products in North and South America, and the other agreement covers sales of Zebra products in Europe, the Middle East and Africa ("EMEA"). The Zebra agreements each have a one year term that automatically renews for additional one year terms, and either party may terminate the agreement upon 30 days' notice to the other party. |
• | Non-exclusive distribution rights to resell products and related services in geographical areas (vendor agreements often include territorial restrictions that limit the countries in which we can sell their products and services). |
• | Short-term periods, subject to periodic renewal, and provide for termination by either party without cause upon 30 to 120 days' notice. |
• | Stock rotation rights, which give us the ability, subject to limitations, to return for credit or exchange a portion of the items purchased. |
• | Price protection provisions, which enables us to take a credit for declines in inventory value resulting from the vendor's price reductions. |
• | POS: We provide POS solutions for retail, grocery and hospitality environments to efficiently manage in-store sales and operations. POS solutions include computer-based terminals, tablets, monitors, payment processing solutions, receipt printers, pole displays, cash drawers, keyboards, peripheral equipment and fully integrated processing units. These solutions may include self-service checkout, kiosks and products that attach to the POS network in the store, including network access points, routers and digital signage. |
• | Payments: We offer payment terminals, comprehensive key injection services, reseller partner branding, extensive key libraries, ability to provide point-to-point encryption (“P2PE”), and redundant key injection facilities. We have the resources to deliver secure payment devices that are preconfigured and ready for use. In addition, we partner with ISVs to deliver to merchants integrated tablet POS solution hardware that a merchant may purchase outright or “as a service,” and which includes merchant hardware support and next-day replacement of tablets, terminals and peripherals. |
• | Barcode: We offer automatic identification and data capture (“AIDC”) technology that incorporates the capabilities for electronic identification and data processing without the need for manual input. These solutions consists of a wide range of products that include portable data collection terminals, wireless products, bar code label printers and scanners. As AIDC technology has become more pervasive, applications have evolved from traditional uses, such as inventory control, materials handling, distribution, shipping and warehouse management, to more advanced applications, such as health care. |
• | Physical Security: We provide electronic physical security solutions that include identification, access control, video surveillance and intrusion-related products and networking infrastructure. Physical security products are used every day across every vertical market to protect lives, property and information. These technology solutions require specialized knowledge to deploy effectively, and we offer in-depth training and education to our customers to enable them to maintain the appropriate skill levels. |
• | Unified Communications and Collaboration: We provide unified communications and collaboration capabilities, such as voice, video, audio conferencing, web conferencing and messaging. These offerings combine voice, data, fax and speech technologies with computers, telecommunications and the internet to deliver communications solutions on-premise, from the cloud and as a hybrid. Software and hardware products include IP-based telephony platforms, Voice over Internet Protocol ("VoIP") systems, private branch exchanges (“PBXs”), call center applications, video conferencing, desk phones and other endpoints. Cloud-delivered services, such as unified communications, contact center and video conferencing, enable end-user customers to consume and pay for communications services typically on a monthly subscription basis. |
• | Cloud and Telecom Services: We offer business communications services, including voice, data, access, cable collaboration, wireless and cloud. We focus on empowering and educating customers so they can advise end-users in making informed choices about services, technology and cost savings. We have contracts with more than 150 of the world’s leading telecom carriers and cloud services providers. |
ITEM 1A. | Risk Factors. |
• | Fluctuations of foreign currency and exchange rates, which can impact sales, costs of the goods we sell and the reporting of our results and assets on our financial statements; |
• | Changes in international trade laws, trade agreements, or trading relationships affecting our import and export activities, including export license requirements, restrictions on the export of certain technology and tariff changes, or the imposition of new or increased trade sanctions; |
• | Difficulties in collecting accounts receivable and longer collection periods; |
• | Changes in, or expiration of, various foreign incentives that provide economic benefits to us; |
• | Labor laws or practices that impact our ability and costs to hire, retain and discharge employees; |
• | Difficulties in staffing and managing operations in foreign countries; |
• | Changes in the interpretation and enforcement of laws (in particular related to items such as duty and taxation), and laws related to data privacy such as GDPR and other similar privacy laws that impact our IT systems and processes; |
• | Global economic and financial market instability related to the U.K.’s referendum withdrawal from the E.U., as well as instability from the possibility of withdrawal of other E.U. member states: |
• | Potential political and economic instability and changes in governments; |
• | Compliance with foreign and domestic import and export regulations and anti-corruption laws, including the Iran Threat Reduction and Syria Human Rights Act of 2012, U.S. Foreign Corrupt Practices Act, U.K. Bribery Act, and similar laws of other jurisdictions, governing our business activities outside the United States, the violation of which could result in severe penalties, including monetary fines, criminal proceedings and suspension of export or import privileges; and |
• | Terrorist or military actions that result in destruction or seizure of our assets or suspension or disruption of our operations or those of our customers, suppliers or service providers. |
ITEM 2. | Properties. |
Location | Approximate Square Footage | Type of Interest | Description of Use |
United States | |||
Greenville, SC | 180,000 | Owned | Headquarters - Principal Executive and Sales Offices |
Southaven, MS | 741,000 | Leased | Warehouse |
Miami, FL | 29,000 | Leased | Sales Office and Warehouse |
Sacramento, CA | 41,000 | Leased | Sales and Administration Offices and Warehouse |
Louisville, KY | 22,000 | Leased | Warehouse |
Petaluma, CA | 17,000 | Leased | Sales and Administration Offices |
International | |||
Mexico City, Mexico | 25,000 | Leased | Warehouse |
Coignieres, France | 15,000 | Leased | Sales Office and Warehouse |
Mainz, Germany | 16,000 | Leased | Sales Office and Warehouse |
Brussels, Belgium | 28,000 | Leased | Sales and Administration Offices |
Sao Jose does Pinhais, Brazil | 24,000 | Leased | Sales Office and Warehouse |
Serra, Espírito Santo, Brazil | 31,000 | Leased | Sales Office and Warehouse |
Itajai, Santa Catarina, Brazil | 164,000 | Leased | Sales Office and Warehouse |
ITEM 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. |
High | Low | ||||||
Fiscal Year 2018 | |||||||
First quarter | $ | 44.35 | $ | 36.20 | |||
Second quarter | 45.35 | 33.55 | |||||
Third quarter | 36.90 | 31.40 | |||||
Fourth quarter | 41.95 | 33.30 | |||||
Fiscal Year 2017 | |||||||
First quarter | $ | 43.49 | $ | 33.89 | |||
Second quarter | 41.70 | 29.05 | |||||
Third quarter | 44.95 | 38.35 | |||||
Fourth quarter | 41.95 | 37.05 |
2013 | 2014 | 2015 | 2016 | 2017 | 2018 | ||||||||||||||||||
ScanSource, Inc. | $ | 100 | $ | 119 | $ | 119 | $ | 116 | $ | 126 | $ | 126 | |||||||||||
NASDAQ Composite | $ | 100 | $ | 132 | $ | 151 | $ | 149 | $ | 190 | $ | 233 | |||||||||||
SIC Code 5045 – Computers & Peripheral Equipment | $ | 100 | $ | 138 | $ | 132 | $ | 159 | $ | 212 | $ | 185 |
Period | Total number of shares purchased | Average price paid per share | Total number of shares purchased as part of the publicly announced plan or program | Approximate dollar value of shares that may yet be purchased under the plan or program | ||||||
April 1, 2018 through April 30, 2018 | — | $ | — | — | $ | 99,664,707 | ||||
May 1, 2018 through May 31, 2018 | 232 | $ | 34.30 | — | $ | 99,664,707 | ||||
June 1, 2018 through June 30, 2018 | 159 | $ | 40.90 | — | 99,664,707 | |||||
Total | 391 | $ | 36.98 | — | $ | 99,664,707 |
Fiscal Year Ended June 30, | |||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
(in thousands, except per share data) | |||||||||||||||||||
Statement of income data: | |||||||||||||||||||
Net sales | $ | 3,846,260 | $ | 3,568,186 | $ | 3,540,226 | $ | 3,218,626 | $ | 2,913,634 | |||||||||
Cost of goods sold | 3,410,135 | 3,184,590 | 3,184,786 | 2,891,536 | 2,612,535 | ||||||||||||||
Gross profit | 436,125 | 383,596 | 355,440 | 327,090 | 301,099 | ||||||||||||||
Selling, general and administrative expenses | 297,475 | 265,178 | 240,115 | 210,985 | 185,116 | ||||||||||||||
Depreciation expense | 13,311 | 9,444 | 7,326 | 5,356 | 3,496 | ||||||||||||||
Intangible amortization expense | 20,657 | 15,524 | 9,828 | 6,641 | 3,880 | ||||||||||||||
Impairment charges (legal recovery) | — | — | — | — | (15,490 | ) | |||||||||||||
Change in fair value of contingent consideration | 37,043 | 5,211 | 1,294 | 2,667 | 2,311 | ||||||||||||||
Operating income | 67,639 | 88,239 | 96,877 | 101,441 | 121,786 | ||||||||||||||
Interest expense | 9,149 | 3,215 | 2,124 | 1,797 | 731 | ||||||||||||||
Interest income | (3,713 | ) | (5,329 | ) | (3,448 | ) | (2,638 | ) | (2,364 | ) | |||||||||
Other (income) expense, net | 1,278 | (11,142 | ) | 2,191 | 2,376 | 312 | |||||||||||||
Income before income taxes | 60,925 | 101,495 | 96,010 | 99,906 | 123,107 | ||||||||||||||
Provision for income taxes | 27,772 | 32,249 | 32,391 | 34,487 | 41,318 | ||||||||||||||
Net income | $ | 33,153 | $ | 69,246 | $ | 63,619 | $ | 65,419 | $ | 81,789 | |||||||||
Net income per common share, basic | $ | 1.30 | $ | 2.74 | $ | 2.40 | $ | 2.29 | $ | 2.89 | |||||||||
Weighted-average shares outstanding, basic | 25,522 | 25,318 | 26,472 | 28,558 | 28,337 | ||||||||||||||
Net income per common share, diluted | $ | 1.29 | $ | 2.71 | $ | 2.38 | $ | 2.27 | $ | 2.86 | |||||||||
Weighted-average shares outstanding, diluted | 25,624 | 25,515 | 26,687 | 28,799 | 28,602 |
As of June 30, | |||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
(in thousands) | |||||||||||||||||||
Balance sheet data: | |||||||||||||||||||
Working capital | $ | 651,851 | $ | 624,748 | $ | 643,793 | $ | 645,398 | $ | 715,850 | |||||||||
Total assets | 1,945,295 | 1,718,303 | 1,491,185 | 1,476,941 | 1,335,124 | ||||||||||||||
Total debt (including current debt) | 249,429 | 97,300 | 76,856 | 8,826 | 5,429 | ||||||||||||||
Total shareholders’ equity | $ | 866,376 | $ | 837,145 | $ | 774,496 | $ | 808,985 | $ | 802,643 |
ITEM 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
• | Worldwide Barcode, Networking & Security |
• | Worldwide Communications & Services |
Fiscal Year Ended June 30, | ||||||||
2018 | 2017 | 2016 | ||||||
Statement of income data: | ||||||||
Net sales | 100.0 | % | 100.0 | % | 100.0 | % | ||
Cost of goods sold | 88.7 | 89.2 | 90.0 | |||||
Gross profit | 11.3 | 10.8 | 10.0 | |||||
Selling, general and administrative expenses, net of amortization expense | 7.7 | 7.4 | 6.8 | |||||
Depreciation expense | 0.3 | 0.3 | 0.2 | |||||
Intangible amortization expense | 0.5 | 0.4 | 0.3 | |||||
Change in fair value of contingent consideration | 1.0 | 0.1 | 0.0 | |||||
Operating income | 1.8 | 2.5 | 2.7 | |||||
Interest expense (income), net | 0.1 | (0.1 | ) | 0.0 | ||||
Other expense (income), net | 0.0 | (0.3 | ) | 0.1 | ||||
Income before income taxes and minority interest | 1.6 | 2.8 | 2.7 | |||||
Provision for income taxes | 0.7 | 0.9 | 0.9 | |||||
Net income | 0.9 | % | 1.9 | % | 1.8 | % |
2018 | 2017 | $ Change | % Change | % Change Constant Currency, Excluding Acquisitions (a) | |||||||||||||
(in thousands) | |||||||||||||||||
Sales by Segment: | |||||||||||||||||
Worldwide Barcode, Networking & Security | $ | 2,628,988 | $ | 2,389,256 | $ | 239,732 | 10.0 | % | 5.0 | % | |||||||
Worldwide Communications & Services | 1,217,272 | 1,178,930 | 38,342 | 3.3 | % | 2.2 | % | ||||||||||
Total net sales | $ | 3,846,260 | $ | 3,568,186 | $ | 278,074 | 7.8 | % | 4.1 | % | |||||||
Sales by Geography Category: | |||||||||||||||||
North American | $ | 2,847,197 | $ | 2,685,820 | $ | 161,377 | 6.0 | % | 2.5 | % | |||||||
International | 999,063 | 882,366 | 116,697 | 13.2 | % | 9.0 | % | ||||||||||
Total net sales | $ | 3,846,260 | $ | 3,568,186 | $ | 278,074 | 7.8 | % | 4.1 | % | |||||||
(a) A reconciliation of non-GAAP net sales in constant currency, excluding acquisitions is presented at the end of Results of Operations, under Non-GAAP Financial Information. |
2017 | 2016 | $ Change | % Change | % Change Constant Currency, Excluding Acquisitions (a) | |||||||||||||
(in thousands) | |||||||||||||||||
Sales by Segment: | |||||||||||||||||
Worldwide Barcode, Networking & Security | $ | 2,389,256 | $ | 2,361,670 | $ | 27,586 | 1.2 | % | (2.0 | )% | |||||||
Communications & Services | 1,178,930 | 1,178,556 | 374 | — | % | (3.2 | )% | ||||||||||
Total net sales | $ | 3,568,186 | $ | 3,540,226 | $ | 27,960 | 0.8 | % | (2.4 | )% | |||||||
Sales by Geography Category: | |||||||||||||||||
North American | $ | 2,685,820 | $ | 2,620,184 | $ | 65,636 | 2.5 | % | (1.1 | )% | |||||||
International | 882,366 | 920,042 | (37,676 | ) | (4.1 | )% | (6.1 | )% | |||||||||
Total net sales | $ | 3,568,186 | $ | 3,540,226 | $ | 27,960 | 0.8 | % | (2.4 | )% | |||||||
(a) A reconciliation of non-GAAP net sales in constant currency, excluding acquisitions is presented at the end of Results of Operations, under Non-GAAP Financial Information. |
% of Sales June 30, | ||||||||||||||||||||
2018 | 2017 | $ Change | % Change | 2018 | 2017 | |||||||||||||||
(in thousands) | ||||||||||||||||||||
Worldwide Barcode, Networking & Security | $ | 238,318 | $ | 195,743 | $ | 42,575 | 21.8 | % | 9.1 | % | 8.2 | % | ||||||||
Worldwide Communications & Services | 197,807 | 187,853 | 9,954 | 5.3 | % | 16.3 | % | 15.9 | % | |||||||||||
Total gross profit | $ | 436,125 | $ | 383,596 | $ | 52,529 | 13.7 | % | 11.3 | % | 10.8 | % |
% of Sales June 30, | ||||||||||||||||||||
2017 | 2016 | $ Change | % Change | 2017 | 2016 | |||||||||||||||
(in thousands) | ||||||||||||||||||||
Worldwide Barcode, Networking & Security | $ | 195,743 | $ | 196,831 | $ | (1,088 | ) | (0.6 | )% | 8.2 | % | 8.3 | % | |||||||
Worldwide Communications & Services | 187,853 | 158,609 | 29,244 | 18.4 | % | 15.9 | % | 13.5 | % | |||||||||||
Total gross profit | $ | 383,596 | $ | 355,440 | $ | 28,156 | 7.9 | % | 10.8 | % | 10.0 | % |
% of Sales June 30, | ||||||||||||||||||||
2018 | 2017 | $ Change | % Change | 2018 | 2017 | |||||||||||||||
(in thousands) | ||||||||||||||||||||
Selling, general and administrative expenses | $ | 297,475 | $ | 265,178 | $ | 32,297 | 12.2 | % | 7.7 | % | 7.4 | % | ||||||||
Depreciation expense | 13,311 | 9,444 | 3,867 | 40.9 | % | 0.3 | % | 0.3 | % | |||||||||||
Intangible amortization expense | 20,657 | 15,524 | 5,133 | 33.1 | % | 0.5 | % | 0.4 | % | |||||||||||
Change in fair value of contingent consideration | 37,043 | 5,211 | 31,832 | 610.9 | % | 1.0 | % | 0.1 | % | |||||||||||
Operating expenses | 368,486 | 295,357 | 73,129 | 24.8 | % | 9.6 | % | 8.3 | % |
% of Sales June 30, | ||||||||||||||||||||
2017 | 2016 | $ Change | % Change | 2017 | 2016 | |||||||||||||||
(in thousands) | ||||||||||||||||||||
Selling, general and administrative expense | $ | 265,178 | $ | 240,115 | $ | 25,063 | 10.4 | % | 7.4 | % | 6.8 | % | ||||||||
Depreciation expense | 9,444 | 7,326 | 2,118 | 28.9 | % | 0.3 | % | 0.2 | % | |||||||||||
Intangible amortization expense | 15,524 | 9,828 | 5,696 | 58.0 | % | 0.4 | % | 0.3 | % | |||||||||||
Change in fair value of contingent consideration | 5,211 | 1,294 | 3,917 | 302.7 | % | 0.1 | % | — | % | |||||||||||
Operating expenses | $ | 295,357 | $ | 258,563 | $ | 36,794 | 14.2 | % | 8.3 | % | 7.3 | % |
% of Sales June 30, | ||||||||||||||||||||
2018 | 2017 | $ Change | % Change | 2018 | 2017 | |||||||||||||||
(in thousands) | ||||||||||||||||||||
Worldwide Barcode, Networking & Security | $ | 56,911 | $ | 49,727 | $ | 7,184 | 14.4 | % | 2.2 | % | 2.1 | % | ||||||||
Worldwide Communications & Services | 10,900 | 39,768 | (28,868 | ) | (72.6 | )% | 0.9 | % | 3.4 | % | ||||||||||
Corporate | (172 | ) | (1,256 | ) | 1,084 | (86.3 | )% | — | % | — | % | |||||||||
Total operating income | $ | 67,639 | $ | 88,239 | $ | (20,600 | ) | (23.3 | )% | 1.8 | % | 2.5 | % |
% of Sales June 30, | ||||||||||||||||||||
2017 | 2016 | $ Change | % Change | 2017 | 2016 | |||||||||||||||
(in thousands) | ||||||||||||||||||||
Worldwide Barcode, Networking & Security | $ | 49,727 | $ | 52,227 | $ | (2,500 | ) | (4.8 | )% | 2.1 | % | 2.2 | % | |||||||
Worldwide Communications & Services | 39,768 | 45,513 | (5,745 | ) | (12.6 | )% | 3.4 | % | 3.9 | % | ||||||||||
Corporate | (1,256 | ) | (863 | ) | (393 | ) | 45.5 | % | — | % | — | % | ||||||||
Total operating income | $ | 88,239 | $ | 96,877 | $ | (8,638 | ) | (8.9 | )% | 2.5 | % | 2.7 | % |
% of Sales June 30, | ||||||||||||||||||||
2018 | 2017 | $ Change | % Change | 2018 | 2017 | |||||||||||||||
(in thousands) | ||||||||||||||||||||
Interest expense | $ | 9,149 | $ | 3,215 | $ | 5,934 | 184.6 | % | 0.2 | % | 0.1 | % | ||||||||
Interest income | (3,713 | ) | (5,329 | ) | 1,616 | (30.3 | )% | (0.1 | )% | (0.1 | )% | |||||||||
Net foreign exchange losses (gains) | 2,096 | 1,919 | 177 | 9.2 | % | 0.1 | % | 0.1 | % | |||||||||||
Other, net | (818 | ) | (13,061 | ) | 12,243 | (93.7 | )% | — | % | (0.4 | )% | |||||||||
Total other (income) expense | $ | 6,714 | $ | (13,256 | ) | $ | 19,970 | (150.6 | )% | 0.2 | % | (0.4 | )% |
% of Sales June 30, | ||||||||||||||||||||
2017 | 2016 | $ Change | % Change | 2017 | 2016 | |||||||||||||||
(in thousands) | ||||||||||||||||||||
Interest expense | $ | 3,215 | $ | 2,124 | $ | 1,091 | 51.4 | % | 0.1 | % | 0.1 | % | ||||||||
Interest income | (5,329 | ) | (3,448 | ) | (1,881 | ) | 54.6 | % | (0.1 | )% | (0.1 | )% | ||||||||
Net foreign exchange (gains) losses | 1,919 | 2,571 | (652 | ) | (25.4 | )% | 0.1 | % | 0.1 | % | ||||||||||
Other, net | (13,061 | ) | (380 | ) | (12,681 | ) | 3,337.1 | % | (0.4 | )% | — | % | ||||||||
Total other (income) expense | $ | (13,256 | ) | $ | 867 | $ | (14,123 | ) | (1,629.0 | )% | (0.4 | )% | — | % |
Three Months Ended | |||||||||||||||||||||||||||||||
Fiscal 2018 | Fiscal 2017 | ||||||||||||||||||||||||||||||
Jun. 30 2018 | Mar. 31 2018 | Dec. 31 2017 | Sept. 30 2017 | Jun. 30 2017 | Mar. 31 2017 | Dec. 31 2016 | Sept. 30 2016 | ||||||||||||||||||||||||
(in thousands, except per share data) | |||||||||||||||||||||||||||||||
Net sales | $ | 993,852 | $ | 895,637 | $ | 1,032,212 | $ | 924,559 | $ | 917,291 | $ | 813,538 | $ | 904,792 | $ | 932,566 | |||||||||||||||
Cost of goods sold | 880,503 | 791,749 | 919,241 | 818,642 | 816,435 | 720,867 | 806,258 | 841,032 | |||||||||||||||||||||||
Gross profit | $ | 113,349 | $ | 103,888 | $ | 112,971 | $ | 105,917 | $ | 100,856 | $ | 92,671 | $ | 98,534 | $ | 91,534 | |||||||||||||||
Change in Fair Value of Contingent Consideration | $ | 8,448 | $ | 4,801 | $ | 6,913 | $ | 16,881 | $ | 1,290 | $ | 1,960 | $ | 1,791 | $ | 169 | |||||||||||||||
Net income | $ | 10,388 | $ | 10,649 | $ | 7,969 | $ | 4,147 | $ | 18,970 | $ | 12,424 | $ | 23,036 | $ | 14,816 | |||||||||||||||
Net income per common share, basic | $ | 0.41 | $ | 0.42 | $ | 0.31 | $ | 0.16 | $ | 0.75 | $ | 0.49 | $ | 0.92 | $ | 0.58 | |||||||||||||||
Weighted-average shares outstanding, basic | 25,577 | 25,572 | 25,506 | 25,434 | 25,341 | 25,262 | 25,146 | 25,523 | |||||||||||||||||||||||
Net income per common share, diluted | $ | 0.40 | $ | 0.42 | $ | 0.31 | $ | 0.16 | $ | 0.74 | $ | 0.49 | $ | 0.91 | $ | 0.58 | |||||||||||||||
Weighted-average shares outstanding, diluted | 25,675 | 25,606 | 25,648 | 25,579 | 25,512 | 25,400 | 25,285 | 25,762 |
Net Sales by Segment: | ||||||||||||||
Fiscal Year Ended June 30, | ||||||||||||||
2018 | 2017 | $ Change | % Change | |||||||||||
Worldwide Barcode, Networking & Security: | (in thousands) | |||||||||||||
Net sales, as reported | $ | 2,628,988 | $ | 2,389,256 | $ | 239,732 | 10.0 | % | ||||||
Foreign exchange impact (a) | (32,561 | ) | — | |||||||||||
Net sales, constant currency | 2,596,427 | 2,389,256 | 207,171 | 8.7 | % | |||||||||
Less: Acquisitions | (87,461 | ) | — | |||||||||||
Net sales, constant currency excluding acquisitions | $ | 2,508,966 | $ | 2,389,256 | $ | 119,710 | 5.0 | % | ||||||
Worldwide Communications & Services: | ||||||||||||||
Net sales, as reported | $ | 1,217,272 | $ | 1,178,930 | $ | 38,342 | 3.3 | % | ||||||
Foreign exchange impact (a) | (5,055 | ) | — | |||||||||||
Net sales, constant currency | 1,212,217 | 1,178,930 | 33,287 | 2.8 | % | |||||||||
Less: Acquisitions | (9,750 | ) | (2,863 | ) | ||||||||||
Net sales, constant currency excluding acquisitions | $ | 1,202,467 | $ | 1,176,067 | $ | 26,400 | 2.2 | % | ||||||
Consolidated: | ||||||||||||||
Net sales, as reported | $ | 3,846,260 | $ | 3,568,186 | $ | 278,074 | 7.8 | % | ||||||
Foreign exchange impact (a) | (37,616 | ) | — | |||||||||||
Net sales, constant currency | 3,808,644 | 3,568,186 | 240,458 | 6.7 | % | |||||||||
Less: Acquisitions | (97,211 | ) | (2,863 | ) | ||||||||||
Net sales, constant currency excluding acquisitions | $ | 3,711,433 | $ | 3,565,323 | $ | 146,110 | 4.1 | % | ||||||
(a) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates. Calculated by translating the net sales for the year ended June 30, 2018 into U.S. dollars using the average foreign exchange rates for the year ended June 30, 2017. |
Fiscal Year Ended June 30, | ||||||||||||||
Worldwide Barcode, Networking & Security: | 2017 | 2016 | $ Change | % Change | ||||||||||
(in thousands) | ||||||||||||||
Net sales, as reported | $ | 2,389,256 | $ | 2,361,670 | $ | 27,586 | 1.2 | % | ||||||
Foreign exchange impact (b) | (10,229 | ) | — | |||||||||||
Net sales, constant currency | 2,379,027 | 2,361,670 | 17,357 | 0.7 | % | |||||||||
Less: Acquisitions | (99,332 | ) | (34,628 | ) | ||||||||||
Net sales, constant currency excluding acquisitions | $ | 2,279,695 | $ | 2,327,042 | $ | (47,347 | ) | (2.0 | )% | |||||
Worldwide Communications & Services: | ||||||||||||||
Net sales, as reported | $ | 1,178,930 | $ | 1,178,556 | $ | 374 | — | % | ||||||
Foreign exchange impact (b) | (8,599 | ) | — | |||||||||||
Net sales, constant currency | 1,170,331 | 1,178,556 | (8,225 | ) | (0.7 | )% | ||||||||
Less: Acquisitions | (29,421 | ) | — | (29,421 | ) | |||||||||
Net sales, constant currency excluding acquisitions | $ | 1,140,910 | $ | 1,178,556 | $ | (37,646 | ) | (3.2 | )% | |||||
Consolidated: | ||||||||||||||
Net sales, as reported | $ | 3,568,186 | $ | 3,540,226 | $ | 27,960 | 0.8 | % | ||||||
Foreign exchange impact (b) | (18,828 | ) | — | |||||||||||
Net sales, constant currency | 3,549,358 | 3,540,226 | 9,132 | 0.3 | % | |||||||||
Less: Acquisitions | (128,753 | ) | (34,628 | ) | ||||||||||
Net sales, constant currency excluding acquisitions | $ | 3,420,605 | $ | 3,505,598 | $ | (84,993 | ) | (2.4 | )% | |||||
(b) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates. Calculated by translating the net sales for the year ended June 30, 2017 into U.S. dollars using the average foreign exchange rates for the year ended June 30, 2016. |
Net Sales by Geography: | ||||||||||||||
Fiscal Year Ended June 30, | ||||||||||||||
2018 | 2017 | $ Change | % Change | |||||||||||
United States and Canada: | (in thousands) | |||||||||||||
Net sales, as reported | $ | 2,847,197 | $ | 2,685,820 | $ | 161,377 | 6.0 | % | ||||||
Less: Acquisitions | (97,211 | ) | (2,863 | ) | ||||||||||
Net sales, excluding acquisitions | $ | 2,749,986 | $ | 2,682,957 | $ | 67,029 | 2.5 | % | ||||||
International: | ||||||||||||||
Net sales, as reported | $ | 999,063 | $ | 882,366 | $ | 116,697 | 13.2 | % | ||||||
Foreign exchange impact (a) | (37,616 | ) | — | |||||||||||
Net sales, constant currency | 961,447 | 882,366 | 79,081 | 9.0 | % | |||||||||
Less: Acquisitions | — | — | ||||||||||||
Net sales, constant currency excluding acquisitions | $ | 961,447 | $ | 882,366 | $ | 79,081 | 9.0 | % | ||||||
Consolidated: | ||||||||||||||
Net sales, as reported | $ | 3,846,260 | $ | 3,568,186 | $ | 278,074 | 7.8 | % | ||||||
Foreign exchange impact (a) | (37,616 | ) | — | |||||||||||
Net sales, constant currency | 3,808,644 | 3,568,186 | 240,458 | 6.7 | % | |||||||||
Less: Acquisitions | (97,211 | ) | (2,863 | ) | ||||||||||
Net sales, constant currency excluding acquisitions | $ | 3,711,433 | $ | 3,565,323 | $ | 146,110 | 4.1 | % | ||||||
(a) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates. Calculated by translating the net sales for the year ended June 30, 2018 into U.S. dollars using the average foreign exchange rates for the year ended June 30, 2017. |
Fiscal Year Ended June 30, | ||||||||||||||
2017 | 2016 | $ Change | % Change | |||||||||||
United States: | (in thousands) | |||||||||||||
Net sales, as reported | $ | 2,685,820 | $ | 2,620,184 | $ | 65,636 | 2.5 | % | ||||||
Less: Acquisitions | (128,753 | ) | (34,628 | ) | ||||||||||
Net sales, constant currency excluding acquisitions | $ | 2,557,067 | $ | 2,585,556 | $ | (28,489 | ) | (1.1 | )% | |||||
International: | ||||||||||||||
Net sales, as reported | $ | 882,366 | $ | 920,042 | $ | (37,676 | ) | (4.1 | )% | |||||
Foreign exchange impact (a) | (18,828 | ) | ||||||||||||
Net sales, constant currency | 863,538 | 920,042 | (56,504 | ) | (6.1 | )% | ||||||||
Less: Acquisitions | — | — | ||||||||||||
Net sales, constant currency excluding acquisitions | $ | 863,538 | $ | 920,042 | $ | (56,504 | ) | (6.1 | )% | |||||
Consolidated: | ||||||||||||||
Net sales, as reported | $ | 3,568,186 | $ | 3,540,226 | $ | 27,960 | 0.8 | % | ||||||
Foreign exchange impact (a) | (18,828 | ) | — | |||||||||||
Net sales, constant currency | 3,549,358 | 3,540,226 | 9,132 | 0.3 | % | |||||||||
Less: Acquisitions | (128,753 | ) | (34,628 | ) | ||||||||||
Net sales, constant currency excluding acquisitions | $ | 3,420,605 | $ | 3,505,598 | $ | (84,993 | ) | (2.4 | )% | |||||
(a) Year-over-year net sales growth rate excluding the translation impact of changes in foreign currency exchange rates. Calculated by translating the net sales for the year ended June 30, 2017 into U.S. dollars using the average foreign exchange rates for the year ended June 30, 2016. |
Year ended June 30, 2018 | Year ended June 30, 2017 | ||||||||||||||||||||||||||||||
Operating Income | Pre-Tax Income | Net Income | Diluted EPS | Operating Income | Pre-Tax Income | Net Income | Diluted EPS | ||||||||||||||||||||||||
(in thousands, except per share data) | |||||||||||||||||||||||||||||||
GAAP Measures | $ | 67,639 | $ | 60,925 | $ | 33,153 | $ | 1.29 | $ | 88,239 | $ | 101,495 | $ | 69,246 | $ | 2.71 | |||||||||||||||
Adjustments: | |||||||||||||||||||||||||||||||
Amortization of intangible assets | 20,657 | 20,657 | 14,021 | 0.55 | 15,524 | 15,524 | 10,247 | 0.40 | |||||||||||||||||||||||
Change in fair value of contingent consideration | 37,043 | 37,043 | 24,697 | 0.96 | 5,211 | 5,211 | 2,921 | 0.11 | |||||||||||||||||||||||
Acquisition costs | 172 | 172 | 172 | 0.01 | 1,256 | 1,256 | 1,256 | 0.06 | |||||||||||||||||||||||
Legal settlement, net of attorney fees | 952 | 952 | 771 | 0.03 | — | (12,777 | ) | (8,047 | ) | (0.32 | ) | ||||||||||||||||||||
Tax recovery and related interest income | (2,466 | ) | (3,119 | ) | (2,058 | ) | (0.08 | ) | — | (1,382 | ) | (5,370 | ) | (0.21 | ) | ||||||||||||||||
Tax reform changes | — | — | 9,034 | 0.35 | — | — | — | — | |||||||||||||||||||||||
Non-GAAP measures | $ | 123,997 | $ | 116,630 | $ | 79,790 | $ | 3.11 | $ | 110,230 | $ | 109,327 | $ | 70,253 | $ | 2.75 |
Operating Income by Segment: | ||||||||||||||||||||
Year ended June 30, | % of Net Sales June 30, | |||||||||||||||||||
2018 | 2017 | $ Change | % Change | 2018 | 2017 | |||||||||||||||
Worldwide Barcode, Networking & Security: | ||||||||||||||||||||
GAAP operating income | $ | 56,911 | $ | 49,727 | $ | 7,184 | 14.4 | % | 2.2 | % | 2.1 | % | ||||||||
Adjustments: | ||||||||||||||||||||
Amortization of intangible assets | 8,703 | 4,033 | 4,670 | |||||||||||||||||
Change in fair value of contingent consideration | 69 | — | 69 | |||||||||||||||||
Tax recovery | (1,512 | ) | — | (1,512 | ) | |||||||||||||||
Non-GAAP operating income | $ | 64,171 | $ | 53,760 | $ | 10,411 | 19.4 | % | 2.4 | % | 2.3 | % | ||||||||
Worldwide Communications & Services: | ||||||||||||||||||||
GAAP operating income | $ | 10,900 | $ | 39,768 | $ | (28,868 | ) | (72.6 | )% | 0.9 | % | 3.4 | % | |||||||
Adjustments: | ||||||||||||||||||||
Amortization of intangible assets | 11,954 | 11,491 | 463 | |||||||||||||||||
Change in fair value of contingent consideration | 36,974 | 5,211 | 31,763 | |||||||||||||||||
Legal settlement | 952 | — | 952 | |||||||||||||||||
Tax recovery | (954 | ) | — | (954 | ) | |||||||||||||||
Non-GAAP operating income | $ | 59,826 | $ | 56,470 | $ | 3,356 | 5.9 | % | 4.9 | % | 4.8 | % | ||||||||
Corporate: | ||||||||||||||||||||
GAAP operating income | $ | (172 | ) | $ | (1,256 | ) | $ | 1,084 | nm* | nm* | nm* | |||||||||
Adjustments: | ||||||||||||||||||||
Acquisition costs | 172 | 1,256 | (1,084 | ) | ||||||||||||||||
Non-GAAP operating income | $ | — | $ | — | $ | — | nm* | nm* | nm* | |||||||||||
Consolidated: | ||||||||||||||||||||
GAAP operating income | $ | 67,639 | $ | 88,239 | $ | (20,600 | ) | (23.3 | )% | 2.5 | % | 2.7 | % | |||||||
Adjustments: | ||||||||||||||||||||
Amortization of intangible assets | 20,657 | 15,524 | 5,133 | |||||||||||||||||
Change in fair value of contingent consideration | 37,043 | 5,211 | 31,832 | |||||||||||||||||
Acquisition costs | 172 | 1,256 | (1,084 | ) | ||||||||||||||||
Legal settlement | 952 | — | 952 | |||||||||||||||||
Tax recovery | (2,466 | ) | — | (2,466 | ) | |||||||||||||||
Non-GAAP operating income | $ | 123,997 | $ | 110,230 | $ | 13,767 | 12.5 | % | 3.1 | % | 2.7 | % |
2018 | 2017 | 2016 | ||||||
Return on invested capital ratio | 12.5 | % | 13.1 | % | 13.3 | % |
Reconciliation of EBITDA to Net Income | Fiscal Year Ended June 30, | ||||||||||
2018 | 2017 | 2016 | |||||||||
(in thousands) | |||||||||||
Net income (GAAP) | $ | 33,153 | $ | 69,246 | $ | 63,619 | |||||
Plus: income taxes | 27,772 | 32,249 | 32,391 | ||||||||
Plus: interest expense | 9,149 | 3,215 | 2,124 | ||||||||
Plus: depreciation & amortization | 37,495 | 24,968 | 17,154 | ||||||||
EBITDA | 107,569 | 129,678 | 115,288 | ||||||||
Change in fair value of contingent consideration | 37,043 | 5,211 | 1,294 | ||||||||
Acquisition costs(a) | 172 | 1,256 | 863 | ||||||||
Legal settlement (recovery), net of attorney fees | 952 | (12,777 | ) | — | |||||||
Tax recovery and related interest income | (3,119 | ) | (1,382 | ) | — | ||||||
Adjusted EBITDA (numerator for ROIC) (non-GAAP) | $ | 142,617 | $ | 121,986 | $ | 117,445 |
Invested capital calculations | Fiscal Year Ended June 30, | ||||||||||
2018 | 2017 | 2016 | |||||||||
(in thousands) | |||||||||||
Equity – beginning of the year | $ | 837,145 | $ | 774,496 | $ | 808,985 | |||||
Equity – end of the year | 866,376 | 837,145 | 774,496 | ||||||||
Change in fair value of contingent consideration, net of tax | 24,697 | 2,921 | 977 | ||||||||
Acquisition costs(a) | 172 | 1,256 | 863 | ||||||||
Legal settlement (recovery), net of attorney fees, net of tax | 771 | (8,047 | ) | — | |||||||
Tax recovery and related interest income, net of tax | (2,058 | ) | (5,370 | ) | — | ||||||
Tax reform changes | 9,034 | — | — | ||||||||
Average equity, adjusted | 868,069 | 801,201 | 792,661 | ||||||||
Average funded debt(b) | 276,233 | 131,445 | 93,500 | ||||||||
Invested capital (denominator) | $ | 1,144,302 | $ | 932,646 | $ | 886,161 | |||||
• | Industry weighted-average cost of capital ("WACC"): We utilized a WACC relative to each reporting unit's respective geography and industry as the discount rate for estimated future cash flows. The WACC is intended to represent a rate of return that would be expected by a market place participant in each respective geography. |
• | Operating income: We utilized historical and expected revenue growth rates, gross margins and operating expense percentages, which varied based on the projections of each reporting unit being evaluated. |
• | Cash flows from working capital changes: We utilized a projected cash flow impact pertaining to expected changes in working capital as each of our goodwill reporting units grow. |
Year ended | |||||||||||
Cash provided by (used in): | June 30, 2018 | June 30, 2017 | June 30, 2016 | ||||||||
(in thousands) | |||||||||||
Operating activities | $ | 27,871 | $ | 94,876 | $ | 52,211 | |||||
Investing activities | (151,927 | ) | (96,236 | ) | (73,556 | ) | |||||
Financing activities | 97,508 | (3,506 | ) | (36,305 | ) | ||||||
Effect of exchange rate change on cash and cash equivalents | (4,016 | ) | (440 | ) | (2,596 | ) | |||||
Increase (decrease) in cash and cash equivalents | $ | (30,564 | ) | $ | (5,306 | ) | $ | (60,246 | ) |
Payments Due by Period | |||||||||||||||||||
Total | Year 1 | Years 2-3 | Years 4-5 | Greater than 5 Years | |||||||||||||||
(in thousands) | |||||||||||||||||||
Contractual Obligations | |||||||||||||||||||
Non-cancelable operating leases(1) | $ | 38,078 | $ | 8,196 | $ | 11,476 | $ | 7,589 | $ | 10,817 | |||||||||
Capital lease | 1,350 | 675 | 675 | — | — | ||||||||||||||
Principal debt payments | 5,429 | 551 | 680 | 698 | 3,500 | ||||||||||||||
Revolving credit facility | 244,000 | — | — | 244,000 | — | ||||||||||||||
Contingent consideration(2) | 108,233 | 42,975 | 65,258 | — | — | ||||||||||||||
Other(3) | — | — | — | — | — | ||||||||||||||
Total obligations | $ | 397,090 | $ | 52,397 | $ | 78,089 | $ | 252,287 | $ | 14,317 |
(1) | Amounts to be paid in future periods for real estate taxes, insurance and other operating expenses applicable to the properties pursuant to the respective operating leases have been excluded from the table above as the amounts payable in future periods are generally not specified in the lease agreements and are dependent upon amounts which are not known at this time. Such amounts were not material in the current fiscal year. |
(2) | Amounts disclosed regarding future Intelisys and Network1 earnout payments are presented at their discounted fair value. Estimated future, undiscounted earnout payments for Intelisys could range as high as $115.3 million as of June 30, 2018. |
(3) | Amounts totaling $23.4 million of deferred compensation, which are included in accrued expenses and other current liabilities and other long-term liabilities in our Consolidated Balance Sheets as of June 30, 2018, have been excluded from the table above due to the uncertainty of the timing of the payment of these obligations, which are generally at the discretion of the individual employees or upon death of the former employee, respectively. |
ITEM 7A. | Quantitative and Qualitative Disclosures about Market Risk. |
ITEM 8. | Financial Statements and Supplementary Data. |
Page | |
Financial Statements | |
/s/ Grant Thornton |
/s/ Grant Thornton |
June 30, 2018 | June 30, 2017 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 25,530 | $ | 56,094 | |||
Accounts receivable, less allowance of $45,561 at June 30, 2018 and $44,434 at June 30, 2017 | 678,940 | 637,293 | |||||
Inventories | 595,948 | 531,314 | |||||
Prepaid expenses and other current assets | 61,744 | 56,322 | |||||
Total current assets | 1,362,162 | 1,281,023 | |||||
Property and equipment, net | 73,042 | 56,566 | |||||
Goodwill | 298,174 | 200,881 | |||||
Identifiable intangible assets, net | 136,806 | 101,513 | |||||
Deferred income taxes | 22,199 | 29,491 | |||||
Other non-current assets | 52,912 | 48,829 | |||||
Total assets | $ | 1,945,295 | $ | 1,718,303 | |||
Liabilities and Shareholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 562,564 | $ | 513,155 | |||
Accrued expenses and other current liabilities | 90,873 | 104,715 | |||||
Current portion of contingent consideration | 42,975 | 30,675 | |||||
Income taxes payable | 13,348 | 7,730 | |||||
Current portion of long-term debt | 551 | — | |||||
Total current liabilities | 710,311 | 656,275 | |||||
Deferred income taxes | 1,769 | 2,008 | |||||
Long-term debt, net of current portion | 4,878 | 5,429 | |||||
Borrowings under revolving credit facility | 244,000 | 91,871 | |||||
Long-term portion of contingent consideration | 65,258 | 83,361 | |||||
Other long-term liabilities | 52,703 | 42,214 | |||||
Total liabilities | 1,078,919 | 881,158 | |||||
Commitments and contingencies | |||||||
Shareholders’ equity: | |||||||
Preferred stock, no par value; 3,000,000 shares authorized, none issued | — | — | |||||
Common stock, no par value; 45,000,000 shares authorized, 25,593,122 and 25,431,845 shares issued and outstanding at June 30, 2018 and June 30, 2017, respectively | 68,220 | 61,169 | |||||
Retained earnings | 882,333 | 849,180 | |||||
Accumulated other comprehensive loss | (84,177 | ) | (73,204 | ) | |||
Total shareholders’ equity | 866,376 | 837,145 | |||||
Total liabilities and shareholders’ equity | $ | 1,945,295 | $ | 1,718,303 |
2018 | 2017 | 2016 | |||||||||
Net sales | $ | 3,846,260 | $ | 3,568,186 | $ | 3,540,226 | |||||
Cost of goods sold | 3,410,135 | 3,184,590 | 3,184,786 | ||||||||
Gross profit | 436,125 | 383,596 | 355,440 | ||||||||
Selling, general and administrative expenses | 297,475 | 265,178 | 240,115 | ||||||||
Depreciation expense | 13,311 | 9,444 | 7,326 | ||||||||
Intangible amortization expense | 20,657 | 15,524 | 9,828 | ||||||||
Change in fair value of contingent consideration | 37,043 | 5,211 | 1,294 | ||||||||
Operating income | 67,639 | 88,239 | 96,877 | ||||||||
Interest expense | 9,149 | 3,215 | 2,124 | ||||||||
Interest income | (3,713 | ) | (5,329 | ) | (3,448 | ) | |||||
Other (income) expense, net | 1,278 | (11,142 | ) | 2,191 | |||||||
Income before income taxes | 60,925 | 101,495 | 96,010 | ||||||||
Provision for income taxes | 27,772 | 32,249 | 32,391 | ||||||||
Net income | $ | 33,153 | $ | 69,246 | $ | 63,619 | |||||
Per share data: | |||||||||||
Net income per common share, basic | $ | 1.30 | $ | 2.74 | $ | 2.40 | |||||
Weighted-average shares outstanding, basic | 25,522 | 25,318 | 26,472 | ||||||||
Net income per common share, diluted | $ | 1.29 | $ | 2.71 | $ | 2.38 | |||||
Weighted-average shares outstanding, diluted | 25,624 | 25,515 | 26,687 |
2018 | 2017 | 2016 | |||||||||
Net income | $ | 33,153 | $ | 69,246 | $ | 63,619 | |||||
Unrealized gain on hedged transaction, net of tax | 1,089 | 13 | — | ||||||||
Foreign currency translation adjustment | (12,062 | ) | (530 | ) | (8,185 | ) | |||||
Comprehensive income | $ | 22,180 | $ | 68,729 | $ | 55,434 | |||||
See accompanying notes to these consolidated financial statements. | |||||||||||
Common Stock (Shares) | Common Stock (Amount) | Retained Earnings | Accumulated Other Comprehensive Loss | Total | ||||||||||||||
Balance at June 30, 2015 | 28,214,153 | $ | 157,172 | $ | 716,315 | $ | (64,502 | ) | $ | 808,985 | ||||||||
Net income | — | — | 63,619 | — | 63,619 | |||||||||||||
Foreign currency translation adjustment | — | — | — | (8,185 | ) | (8,185 | ) | |||||||||||
Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes | 284,730 | 3,994 | — | — | 3,994 | |||||||||||||
Common stock repurchased | (2,884,210 | ) | (100,751 | ) | (100,751 | ) | ||||||||||||
Share based compensation | — | 7,093 | — | — | 7,093 | |||||||||||||
Tax shortfall from exercise or vesting of share-based payment arrangements | — | (259 | ) | — | — | (259 | ) | |||||||||||
Balance at June 30, 2016 | 25,614,673 | 67,249 | 779,934 | (72,687 | ) | 774,496 | ||||||||||||
Net income | — | — | 69,246 | — | 69,246 | |||||||||||||
Unrealized gain on hedged transaction, net of tax | — | — | — | 13 | 13 | |||||||||||||
Foreign currency translation adjustment | — | — | — | (530 | ) | (530 | ) | |||||||||||
Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes | 394,815 | 8,208 | — | — | 8,208 | |||||||||||||
Common stock repurchased | (577,643 | ) | (20,335 | ) | (20,335 | ) | ||||||||||||
Share based compensation | — | 6,578 | — | — | 6,578 | |||||||||||||
Tax shortfall from exercise or vesting of share-based payment arrangements | — | (531 | ) | — | — | (531 | ) | |||||||||||
Balance at June 30, 2017 | 25,431,845 | 61,169 | 849,180 | (73,204 | ) | 837,145 | ||||||||||||
Net income | — | — | 33,153 | — | 33,153 | |||||||||||||
Unrealized gain on hedged transaction, net of tax | — | — | — | 1,089 | 1,089 | |||||||||||||
Foreign currency translation adjustment | — | — | — | (12,062 | ) | (12,062 | ) | |||||||||||
Exercise of stock options and shares issued under share-based compensation plans, net of shares withheld for employee taxes | 161,277 | 636 | — | — | 636 | |||||||||||||
Share based compensation | — | 6,415 | — | — | 6,415 | |||||||||||||
Balance at June 30, 2018 | 25,593,122 | $ | 68,220 | $ | 882,333 | $ | (84,177 | ) | $ | 866,376 |
2018 | 2017 | 2016 | |||||||||
Cash flows from operating activities: | |||||||||||
Net income | $ | 33,153 | $ | 69,246 | $ | 63,619 | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | 37,495 | 24,968 | 17,154 | ||||||||
Amortization of debt issue costs | 326 | 290 | 297 | ||||||||
Provision for doubtful accounts | 7,075 | 8,901 | 7,571 | ||||||||
Share-based compensation | 6,459 | 6,602 | 7,093 | ||||||||
Deferred income taxes | (22,286 | ) | (1,861 | ) | 1,846 | ||||||
Excess tax benefits from share-based payment arrangements | — | (89 | ) | (101 | ) | ||||||
Change in fair value of contingent consideration | 37,043 | 5,211 | 1,294 | ||||||||
Changes in operating assets and liabilities, net of acquisitions: | |||||||||||
Accounts receivable | (46,766 | ) | (66,129 | ) | 14,167 | ||||||
Inventories | (59,498 | ) | 28,449 | 2,999 | |||||||
Prepaid expenses and other assets | (6,366 | ) | (4,300 | ) | 4,612 | ||||||
Other noncurrent assets | (6,361 | ) | (9,540 | ) | (2,186 | ) | |||||
Accounts payable | 44,464 | 19,861 | (71,706 | ) | |||||||
Accrued expenses and other liabilities | (11,540 | ) | 8,491 | 6,401 | |||||||
Income taxes payable | 14,673 | 4,776 | (849 | ) | |||||||
Net cash provided by operating activities | 27,871 | 94,876 | 52,211 | ||||||||
Cash flows from investing activities: | |||||||||||
Capital expenditures | (8,159 | ) | (8,849 | ) | (12,081 | ) | |||||
Cash paid for business acquisitions, net of cash acquired | (143,768 | ) | (83,804 | ) | (61,475 | ) | |||||
Payments for acquisition of intangible assets | — | (3,583 | ) | — | |||||||
Net cash used in investing activities | (151,927 | ) | (96,236 | ) | (73,556 | ) | |||||
Cash flows from financing activities: | |||||||||||
Borrowings on revolving credit, net of expenses | 2,301,443 | 1,813,062 | 1,376,620 | ||||||||
Repayments on revolving credit, net of expenses | (2,149,659 | ) | (1,792,620 | ) | (1,305,193 | ) | |||||
Repayments on long-term debt | — | — | (2,792 | ) | |||||||
Repayments of capital lease obligations | (591 | ) | (246 | ) | (223 | ) | |||||
Debt issuance costs | (296 | ) | (876 | ) | — | ||||||
Contingent consideration payments | (54,025 | ) | (10,241 | ) | (8,606 | ) | |||||
Exercise of stock options | 2,273 | 9,969 | 5,542 | ||||||||
Taxes paid on settlement of equity awards | (1,637 | ) | (1,761 | ) | (1,548 | ) | |||||
Repurchase of common stock | — | (20,882 | ) | (100,206 | ) | ||||||
Excess tax benefits from share-based payment arrangements | — | 89 | 101 | ||||||||
Net cash provided by (used in) financing activities | 97,508 | (3,506 | ) | (36,305 | ) | ||||||
Effect of exchange rate changes on cash and cash equivalents | (4,016 | ) | (440 | ) | (2,596 | ) | |||||
Decrease in cash and cash equivalents | (30,564 | ) | (5,306 | ) | (60,246 | ) | |||||
Cash and cash equivalents at beginning of period | 56,094 | 61,400 | 121,646 | ||||||||
Cash and cash equivalents at end of period | $ | 25,530 | $ | 56,094 | $ | 61,400 |
2018 | 2017 | 2016 | |||||||||
(continued) | |||||||||||
Supplemental disclosure of cash flow information: | |||||||||||
Interest paid during the year | $ | 8,544 | $ | 2,831 | $ | 1,706 | |||||
Income taxes paid during the year | $ | 38,330 | $ | 31,126 | $ | 33,859 |
(1) | Business and Summary of Significant Accounting Policies |
• | Industry weighted-average cost of capital ("WACC"): The Company utilized a WACC relative to each reporting unit's respective geography and industry as the discount rate for estimated future cash flows. The WACC is intended to represent a rate of return that would be expected by a market participant in each respective geography. |
• | Operating income: The Company utilized historical and expected revenue growth rates, gross margins and operating expense percentages, which varied based on the projections of each reporting unit being evaluated. |
• | Other cash flow adjustments: The Company utilized a projected cash flow impact pertaining to depreciation, capital expenditures and expected changes in working capital as each of its goodwill reporting units grow. |
Fiscal Year Ended June 30, | |||||||||||
2018 | 2017 | 2016 | |||||||||
(in thousands, except per share data) | |||||||||||
Numerator: | |||||||||||
Net income | $ | 33,153 | $ | 69,246 | $ | 63,619 | |||||
Denominator: | |||||||||||
Weighted-average shares, basic | 25,522 | 25,318 | 26,472 | ||||||||
Dilutive effect of share-based payments | 102 | 197 | 215 | ||||||||
Weighted-average shares, diluted | 25,624 | 25,515 | 26,687 | ||||||||
Net income per common share, basic | $ | 1.30 | $ | 2.74 | $ | 2.40 | |||||
Net income per common share, diluted | $ | 1.29 | $ | 2.71 | $ | 2.38 |
June 30, | |||||||
2018 | 2017 | ||||||
(in thousands) | |||||||
Land | $ | 3,331 | $ | 3,331 | |||
Buildings and leasehold improvements | 21,384 | 21,101 | |||||
Computer software and equipment | 74,220 | 53,583 | |||||
Furniture, fixtures and equipment | 27,077 | 26,059 | |||||
Construction in progress | 1,584 | 4,556 | |||||
Rental equipment | 13,817 | — | |||||
141,413 | 108,630 | ||||||
Less accumulated depreciation | (68,371 | ) | (52,064 | ) | |||
$ | 73,042 | $ | 56,566 |
June 30, | |||||||
2018 | 2017 | ||||||
(in thousands) | |||||||
Deferred warranty revenue | $ | 21,065 | $ | 24,813 | |||
Accrued compensation | 22,378 | 21,713 | |||||
Other taxes payable | 18,560 | 18,440 | |||||
Accrued marketing expense | 4,457 | 5,914 | |||||
Brazilian pre-acquisition contingencies | 1,385 | 3,506 | |||||
Accrued freight | 3,849 | 3,392 | |||||
Other accrued liabilities | 19,179 | 26,937 | |||||
$ | 90,873 | $ | 104,715 |
POS Portal | |||
(in thousands) | |||
Receivables | $ | 8,914 | |
Inventory | 8,352 | ||
Other current assets | 917 | ||
Property and equipment, net | 24,963 | ||
Goodwill | 101,198 | ||
Identifiable intangible assets | 57,000 | ||
Other non-current assets | 100 | ||
$ | 201,444 | ||
Accounts payable | $ | 10,897 | |
Accrued expenses and other current liabilities | 5,130 | ||
Contingent consideration | 13,098 | ||
Other long-term liabilities | 102 | ||
Long-term deferred taxes payable | 28,449 | ||
Consideration transferred, net of cash acquired | 143,768 | ||
$ | 201,444 |
Intelisys | |||
(in thousands) | |||
Receivables, net | $ | 21,655 | |
Other current assets | 1,547 | ||
Property and equipment, net | 5,298 | ||
Goodwill | 109,005 | ||
Identifiable intangible assets | 63,110 | ||
Other non-current assets | 1,839 | ||
$ | 202,454 | ||
Accounts payable | $ | 21,063 | |
Accrued expenses and other current liabilities | 2,587 | ||
Contingent consideration | 95,000 | ||
Consideration transferred, net of cash acquired | 83,804 | ||
$ | 202,454 |
(6) | Goodwill and Other Identifiable Intangible Assets |
Worldwide Barcode, Networking & Security Segment | Worldwide Communications & Services Segment | Total | |||||||||
(in thousands) | |||||||||||
Balance at June 30, 2016 | $ | 36,434 | $ | 56,281 | $ | 92,715 | |||||
Additions | — | 109,005 | 109,005 | ||||||||
Unrealized loss on foreign currency translation | (174 | ) | (665 | ) | (839 | ) | |||||
Balance at June 30, 2017 | $ | 36,260 | $ | 164,621 | $ | 200,881 | |||||
Additions | 101,198 | — | 101,198 | ||||||||
Unrealized loss on foreign currency translation | (244 | ) | (3,661 | ) | (3,905 | ) | |||||
Balance at June 30, 2018 | $ | 137,214 | $ | 160,960 | $ | 298,174 |
June 30, 2018 | June 30, 2017 | ||||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Book Value | Gross Carrying Amount | Accumulated Amortization | Net Book Value | ||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
Amortized intangible assets: | |||||||||||||||||||||||
Customer relationships | $ | 139,479 | $ | 40,337 | $ | 99,142 | $ | 110,691 | $ | 27,977 | $ | 82,714 | |||||||||||
Trade names | 27,123 | 12,224 | 14,899 | 23,256 | 8,691 | 14,565 | |||||||||||||||||
Non-compete agreements | 3,064 | 1,221 | 1,843 | 1,160 | 608 | 552 | |||||||||||||||||
Distributor agreements | 363 | 188 | 175 | 355 | 158 | 197 | |||||||||||||||||
Supplier partner program | 3,583 | 456 | 3,127 | 3,583 | 98 | 3,485 | |||||||||||||||||
Encryption key library | 19,900 | 2,280 | 17,620 | — | — | — | |||||||||||||||||
Total intangibles | $ | 193,512 | $ | 56,706 | $ | 136,806 | $ | 139,045 | $ | 37,532 | $ | 101,513 |
Amortization Expense | |||
(in thousands) | |||
Year Ended June 30, | |||
2019 | $ | 18,920 | |
2020 | 18,308 | ||
2021 | 18,200 | ||
2022 | 16,564 | ||
2023 | 15,591 | ||
Thereafter | 49,223 | ||
Total | $ | 136,806 |
(7) | Short-Term Borrowings and Long-Term Debt |
2018 | 2017 | ||||||
(in thousands) | |||||||
Current portion of long-term debt | $ | 551 | $ | — | |||
Long term debt, net of current portion | 4,878 | 5,429 | |||||
Borrowings under revolving credit facility | 244,000 | 91,871 | |||||
Total debt | $ | 249,429 | $ | 97,300 |
Revolving Credit Facility | Long-Term Debt | ||||||
(in thousands) | |||||||
Fiscal year: | |||||||
2019 | $ | — | $ | 551 | |||
2020 | — | 338 | |||||
2021 | — | 342 | |||||
2022 | 244,000 | 347 | |||||
2023 | — | 351 | |||||
Thereafter | — | 3,500 | |||||
Total principal payments | $ | 244,000 | $ | 5,429 |
Fiscal Year Ended June 30, | |||||||||||
2018 | 2017 | 2016 | |||||||||
(in thousands) | |||||||||||
Net foreign exchange derivative contract loss (gain) | $ | 386 | $ | 146 | $ | (1,951 | ) | ||||
Net foreign currency transactional and re-measurement loss | 1,710 | 1,773 | 4,522 | ||||||||
Net foreign currency loss | $ | 2,096 | $ | 1,919 | $ | 2,571 |
Fiscal Year Ended | ||||||
June 30, 2018 | June 30, 2017 | |||||
(in thousands) | ||||||
Net interest expense recognized as a result of interest rate swap | $ | 161 | $ | 7 | ||
Unrealized gain in fair value of interest swap rates | 1,422 | 14 | ||||
Net increase in accumulated other comprehensive income (loss) | $ | 1,583 | $ | 21 | ||
Income tax effect | 494 | 8 | ||||
Net increase in accumulated other comprehensive income (loss), net of tax | $ | 1,089 | $ | 13 |
June 30, 2018 | |||||||||
Balance Sheet Location | Fair Value of Derivatives Designated as Hedge Instruments | Fair Value of Derivatives Not Designated as Hedge Instruments | |||||||
(in thousands) | |||||||||
Derivative assets: | |||||||||
Foreign exchange contracts | Prepaid expenses and other current assets | $ | — | $ | 157 | ||||
Interest rate swap agreement | Other current assets | $ | 1,604 | $ | — | ||||
Derivative liabilities: | |||||||||
Foreign exchange contracts | Accrued expenses and other current liabilities | $ | — | $ | 156 |
June 30, 2017 | |||||||||
Balance Sheet Location | Fair Value of Derivatives Designated as Hedge Instruments | Fair Value of Derivatives Not Designated as Hedge Instruments | |||||||
(in thousands) | |||||||||
Derivative assets: | |||||||||
Foreign exchange contracts | Prepaid expenses and other current assets | $ | — | $ | 35 | ||||
Interest rate swap agreement | Other current assets | $ | 21 | $ | — | ||||
Derivative liabilities: | |||||||||
Foreign exchange contracts | Accrued expenses and other current liabilities | $ | — | $ | 131 |
• | Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; |
• | Level 2 – Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; |
• | Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e. supported by little or no market activity). |
Total | Quoted prices in active markets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | ||||||||||||
(in thousands) | |||||||||||||||
Assets: | |||||||||||||||
Deferred compensation plan investments, current and non-current portion | $ | 23,352 | $ | 23,352 | $ | — | $ | — | |||||||
Forward foreign currency exchange contracts | 157 | — | 157 | — | |||||||||||
Interest rate swap agreement | 1,604 | — | 1,604 | — | |||||||||||
Total assets at fair value | $ | 25,113 | $ | 23,352 | $ | 1,761 | $ | — | |||||||
Liabilities: | |||||||||||||||
Deferred compensation plan investments, current and non-current portion | $ | 23,352 | $ | 23,352 | $ | — | $ | — | |||||||
Forward foreign currency exchange contracts | 156 | — | 156 | — | |||||||||||
Liability for contingent consideration, current and non-current | 108,233 | — | — | 108,233 | |||||||||||
Total liabilities at fair value | $ | 131,741 | $ | 23,352 | $ | 156 | $ | 108,233 |
Total | Quoted prices in active markets (Level 1) | Significant other observable inputs (Level 2) | Significant unobservable inputs (Level 3) | ||||||||||||
(in thousands) | |||||||||||||||
Assets: | |||||||||||||||
Deferred compensation plan investments, current and non-current portion | $ | 21,439 | $ | 21,439 | $ | — | $ | — | |||||||
Forward foreign currency exchange contracts | 35 | — | 35 | — | |||||||||||
Interest rate swap agreement | 21 | — | 21 | — | |||||||||||
Total assets at fair value | $ | 21,495 | $ | 21,439 | $ | 56 | $ | — | |||||||
Liabilities: | |||||||||||||||
Deferred compensation plan investments, current and non-current portion | $ | 21,074 | $ | 21,074 | $ | — | $ | — | |||||||
Forward foreign currency exchange contracts | 131 | — | 131 | — | |||||||||||
Liability for contingent consideration, current and non-current | 114,036 | — | — | 114,036 | |||||||||||
Total liabilities at fair value | $ | 135,241 | $ | 21,074 | $ | 131 | $ | 114,036 |
Contingent Consideration for the Fiscal Year Ended | |||||||||||
June 30, 2018 | |||||||||||
Worldwide Barcode, Networking & Security Segment | Worldwide Communications & Services Segment | Total | |||||||||
(in thousands) | |||||||||||
Fair value at beginning of period | $ | — | $ | 114,036 | $ | 114,036 | |||||
Issuance of contingent consideration | 13,098 | — | 13,098 | ||||||||
Payments | (13,167 | ) | (40,858 | ) | (54,025 | ) | |||||
Adjustments to contingent consideration (1) | — | (779 | ) | (779 | ) | ||||||
Change in fair value | 69 | 36,974 | 37,043 | ||||||||
Fluctuation due to foreign currency exchange | — | (1,140 | ) | (1,140 | ) | ||||||
Fair value at end of period | $ | — | $ | 108,233 | $ | 108,233 |
Contingent Consideration for the Fiscal Year Ended | |||||||||||
June 30, 2017 | |||||||||||
Worldwide Barcode, Networking & Security Segment | Worldwide Communications & Services Segment | Total | |||||||||
(in thousands) | |||||||||||
Fair value at beginning of period | $ | — | $ | 24,652 | $ | 24,652 | |||||
Issuance of contingent consideration | — | 95,000 | 95,000 | ||||||||
Payments | — | (10,241 | ) | (10,241 | ) | ||||||
Change in fair value | — | 5,211 | 5,211 | ||||||||
Fluctuation due to foreign currency exchange | — | (586 | ) | (586 | ) | ||||||
Fair value at end of period | $ | — | $ | 114,036 | $ | 114,036 |
• | estimated future results, net of pro forma adjustments set forth in the purchase agreements; |
• | the probability of achieving these results; and |
• | a discount rate reflective of the Company's creditworthiness and market risk premium associated with the United States and Brazilian markets. |
Reporting Period | Valuation Technique | Significant Unobservable Inputs | Weighted Average Rates | ||||
June 30, 2018 | Discounted cash flow | Weighted average cost of capital | 8.6 | % | |||
Adjusted EBITDA growth rate | 18.2 | % | |||||
June 30, 2017 | Discounted cash flow | Weighted average cost of capital | 14.2 | % | |||
Adjusted EBITDA growth rate | 17.0 | % |
Contingent Consideration | |||
(in thousands) | |||
Fiscal year: | |||
2019 | $ | 42,975 | |
2020 | 32,239 | ||
2021 | 33,019 | ||
Total contingent consideration payments | $ | 108,233 |
Fiscal Year Ended June 30, | |||||||||||
2018 | 2017 | 2016 | |||||||||
(in thousands) | |||||||||||
Share-based compensation related to: | |||||||||||
Equity classified stock options | $ | 1,184 | $ | 1,356 | $ | 1,479 | |||||
Equity classified restricted stock | 5,275 | 5,246 | 5,614 | ||||||||
Total share-based compensation | $ | 6,459 | $ | 6,602 | $ | 7,093 |
Fiscal Year Ended June 30, | |||||||||||
2018 | 2017 | 2016 | |||||||||
Expected term | 5 years | 5 years | 4.02 years | ||||||||
Expected volatility | 30.70 | % | 30.88 | % | 28.70 | % | |||||
Risk-free interest rate | 2.17 | % | 1.84 | % | 1.47 | % | |||||
Dividend yield | 0.00 | % | 0.00 | % | 0.00 | % | |||||
Weighted-average fair value per option | $ | 10.60 | $ | 11.26 | $ | 9.53 |
Fiscal Year Ended June 30, 2018 | ||||||||||||
Options | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Life | Aggregate Intrinsic Value | |||||||||
Outstanding, beginning of year | 872,989 | $ | 37.63 | |||||||||
Granted during the period | 119,132 | 34.27 | ||||||||||
Exercised during the period | (62,701 | ) | 35.72 | |||||||||
Canceled, forfeited, or expired during the period | (32,300 | ) | 37.17 | |||||||||
Outstanding, end of year | 897,120 | 37.33 | 5.95 | $ | 3,089,365 | |||||||
Vested and expected to vest at June 30, 2018 | 895,187 | 37.34 | 5.94 | $ | 3,078,179 | |||||||
Exercisable, end of year | 685,554 | $ | 37.84 | 5.07 | $ | 2,113,769 |
Fiscal Year Ended June 30, 2018 | ||||||||||
Options | Weighted Average Exercise Price | Weighted Average Grant Date Fair- Value | ||||||||
Unvested, beginning of year | 215,970 | $ | 38.48 | $ | 10.39 | |||||
Granted | 119,132 | 34.27 | 10.60 | |||||||
Vested | (123,536 | ) | 39.20 | 10.33 | ||||||
Unvested, end of year | 211,566 | $ | 35.69 | $ | 10.54 |
Options Outstanding | Options Exercisable | |||||||||||||||
Range of Exercise Prices | Shares Outstanding | Weighted Average Remaining Contractual Life | Weighted Average Exercise Price | Number Exercisable | Weighted Average Exercise Price | |||||||||||
$18.13 - $22.27 | 2,800 | 0.43 | $ | 18.14 | 2,800 | $ | 18.14 | |||||||||
$22.27 - $26.38 | 25,000 | 1.43 | 24.57 | 25,000 | 24.57 | |||||||||||
$26.38 - $30.49 | 20,731 | 4.44 | 29.80 | 20,731 | 29.80 | |||||||||||
$30.49 - $34.60 | 197,971 | 7.17 | 34.21 | 82,839 | 34.27 | |||||||||||
$34.60 - $38.71 | 371,169 | 5.67 | 37.04 | 274,735 | 36.87 | |||||||||||
$38.71 - $42.82 | 279,449 | 6.02 | 41.83 | 279,449 | 41.83 | |||||||||||
897,120 | 5.95 | $ | 37.33 | 685,554 | $ | 37.84 |
Fiscal Year Ended June 30, 2018 | ||||||||||
Shares granted | Date granted | Grant date fair value | Vesting period | |||||||
Employees | ||||||||||
Certain employees based on performance | 92,469 | December 8, 2017 | $ | 34.35 | Annually over 3 years | |||||
Certain employees based on performance(1) | 31,296 | February 1, 2018 | $ | 34.95 | January 1, 2018 through December 31, 2020 | |||||
Non-Employee Directors(2) | ||||||||||
Certain Directors | 500 | September 11, 2017 | $ | 37.75 | 6 months | |||||
Certain Directors | 14,400 | December 8, 2017 | $ | 34.35 | 6 months |
Fiscal Year Ended June 30, 2018 | ||||||
Shares | Weighted-Average Grant Date Fair Value | |||||
Outstanding, beginning of year | 267,386 | $ | 37.86 | |||
Granted during the period | 138,665 | 34.50 | ||||
Target shares adjustment during the period (1) | (216 | ) | 36.33 | |||
Vested during the period | (146,046 | ) | 38.16 | |||
Cancelled, forfeited, or expired during the period | (6,270 | ) | 34.77 | |||
Outstanding, end of year | 253,519 | $ | 35.93 |
Fiscal Year Ended June 30, | |||||||||||
2018 | 2017 | 2016 | |||||||||
(in thousands) | |||||||||||
Matching contributions | $ | 1,163 | $ | 875 | $ | 735 | |||||
Discretionary contributions | 4,700 | 3,413 | 3,617 | ||||||||
Total contributions | $ | 5,863 | $ | 4,288 | $ | 4,352 |
Fiscal Year Ended June 30, | |||||||||||
2018 | 2017 | 2016 | |||||||||
(in thousands) | |||||||||||
Current: | |||||||||||
Federal | $ | 38,263 | $ | 31,149 | $ | 21,855 | |||||
State | 3,503 | 2,615 | 1,652 | ||||||||
Foreign | 9,203 | 269 | 6,100 | ||||||||
Total current | 50,969 | 34,033 | 29,607 | ||||||||
Deferred: | |||||||||||
Federal | (9,987 | ) | (3,832 | ) | 3,990 | ||||||
State | (1,962 | ) | (397 | ) | 365 | ||||||
Foreign | (11,248 | ) | 2,445 | (1,571 | ) | ||||||
Total deferred | (23,197 | ) | (1,784 | ) | 2,784 | ||||||
Provision for income taxes | $ | 27,772 | $ | 32,249 | $ | 32,391 |
Fiscal Year Ended June 30, | |||||||||||
2018 | 2017 | 2016 | |||||||||
(in thousands) | |||||||||||
U.S. statutory rate | 28.0 | % | 35.0 | % | 35.0 | % | |||||
U.S. Federal income tax at statutory rate | $ | 17,094 | $ | 35,524 | $ | 33,603 | |||||
Increase (decrease) in income taxes due to: | |||||||||||
State and local income taxes, net of Federal benefit | 1,883 | 1,729 | 1,578 | ||||||||
Tax credits | (1,825 | ) | (1,430 | ) | (2,517 | ) | |||||
Valuation allowance | 1,530 | 444 | 541 | ||||||||
Effect of foreign operations, net | (1,396 | ) | (1,477 | ) | (1,150 | ) | |||||
Stock compensation | 1,049 | (61 | ) | (62 | ) | ||||||
Capitalized acquisition costs | 48 | 231 | 70 | ||||||||
Nontaxable income | (9 | ) | (4,437 | ) | — | ||||||
Disallowed interest | 1,888 | 2,011 | 571 | ||||||||
Other | (1,438 | ) | (285 | ) | (243 | ) | |||||
U.S. Tax Reform transition tax | 9,609 | — | — | ||||||||
U.S. Tax Reform impact of rate change on deferred taxes | (1,615 | ) | — | — | |||||||
Belgium Tax Reform impact of rate change on deferred taxes | 1,040 | — | — | ||||||||
Other jurisdictions impact of rate change on deferred taxes | (86 | ) | — | — | |||||||
Provision for income taxes | $ | 27,772 | $ | 32,249 | $ | 32,391 |
June 30, | |||||||
2018 | 2017 | ||||||
(in thousands) | |||||||
Deferred tax assets derived from: | |||||||
Allowance for accounts receivable | $ | 12,874 | $ | 11,687 | |||
Inventories | 4,060 | 5,235 | |||||
Nondeductible accrued expenses | 7,426 | 3,968 | |||||
Net operating loss carryforwards | 5,350 | 3,141 | |||||
Tax credits | 5,795 | 4,094 | |||||
Timing of amortization deduction from goodwill | 5,756 | 1,285 | |||||
Deferred compensation | 5,696 | 7,934 | |||||
Stock compensation | 2,809 | 5,424 | |||||
Timing of amortization deduction from intangible assets | 2,510 | 3,032 | |||||
Total deferred tax assets | 52,276 | 45,800 | |||||
Valuation allowance | (5,098 | ) | (3,473 | ) | |||
Total deferred tax assets, net of allowance | 47,178 | 42,327 | |||||
Deferred tax liabilities derived from: | |||||||
Timing of depreciation and other deductions from building and equipment | (7,468 | ) | (7,778 | ) | |||
Timing of amortization deduction from goodwill | (1,782 | ) | (5,013 | ) | |||
Timing of amortization deduction from intangible assets | (17,498 | ) | (2,053 | ) | |||
Total deferred tax liabilities | (26,748 | ) | (14,844 | ) | |||
Net deferred tax assets | $ | 20,430 | $ | 27,483 |
Fiscal Year Ended June 30, | |||||||||||
2018 | 2017 | 2016 | |||||||||
(in thousands) | |||||||||||
Domestic | $ | 66,416 | $ | 79,871 | $ | 76,062 | |||||
Foreign | (5,491 | ) | 21,624 | 19,948 | |||||||
Worldwide pretax earnings | $ | 60,925 | $ | 101,495 | $ | 96,010 |
June 30, | |||||||||||
2018 | 2017 | 2016 | |||||||||
(in thousands) | |||||||||||
Beginning Balance | $ | 2,176 | $ | 2,148 | $ | 1,301 | |||||
Additions based on tax positions related to the current year | 157 | 174 | 326 | ||||||||
Additions for tax positions of prior years | — | — | 658 | ||||||||
Reduction for tax positions of prior years | (280 | ) | (146 | ) | (137 | ) | |||||
Ending Balance | $ | 2,053 | $ | 2,176 | $ | 2,148 |
Fiscal Year Ended June 30, | |||||||||||
2018 | 2017 | 2016 | |||||||||
(in thousands) | |||||||||||
Lease expense | $ | 9,824 | $ | 8,703 | $ | 7,394 |
Operating Lease Payments | Capital Lease Payments | Total Payments | |||||||||
(in thousands) | |||||||||||
Fiscal Year Ended June 30, | |||||||||||
2019 | $ | 8,196 | $ | 675 | $ | 8,871 | |||||
2020 | 6,160 | 675 | 6,835 | ||||||||
2021 | 5,316 | — | 5,316 | ||||||||
2022 | 4,185 | — | 4,185 | ||||||||
2023 | 3,404 | — | 3,404 | ||||||||
Thereafter | 10,817 | — | 10,817 | ||||||||
Total future minimum lease payments | 38,078 | 1,350 | 39,428 | ||||||||
Less: amounts representing interest on capital lease | — | 30 | 30 | ||||||||
Total future minimum principal lease payments | $ | 38,078 | $ | 1,320 | $ | 39,398 |
Capital Lease Obligations | |||||||||||||||||||||||
Property & Equipment | Accumulated Depreciation | Net Book Value | Short-Term | Long-Term | Total | ||||||||||||||||||
(in thousands) | |||||||||||||||||||||||
IT Infrastructure | $ | 1,583 | $ | (259 | ) | $ | 1,324 | $ | 653 | $ | 667 | $ | 1,320 |
June 30, 2018 | June 30, 2017 | ||||||
(in thousands) | |||||||
Assets | |||||||
Prepaid expenses and other assets (current) | $ | — | $ | 2,212 | |||
Other assets (noncurrent) | $ | — | $ | — | |||
Liabilities | |||||||
Other current liabilities | $ | — | $ | 2,212 | |||
Other long-term liabilities | $ | — | $ | — |
June 30, 2018 | June 30, 2017 | ||||||
(in thousands) | |||||||
Assets | |||||||
Prepaid expenses and other assets (current) | $ | 1,385 | $ | 1,294 | |||
Other assets (noncurrent) | $ | 5,700 | $ | 8,235 | |||
Liabilities | |||||||
Other current liabilities | $ | 1,385 | $ | 1,294 | |||
Other long-term liabilities | $ | 5,700 | $ | 8,235 |
Fiscal Year Ended June 30, | |||||||||||
2018 | 2017 | 2016 | |||||||||
(in thousands) | |||||||||||
Sales: | |||||||||||
Worldwide Barcode, Networking & Security | $ | 2,628,988 | $ | 2,389,256 | $ | 2,361,670 | |||||
Worldwide Communications & Services | 1,217,272 | 1,178,930 | 1,178,556 | ||||||||
$ | 3,846,260 | $ | 3,568,186 | $ | 3,540,226 | ||||||
Depreciation and amortization: | |||||||||||
Worldwide Barcode, Networking & Security | $ | 18,233 | $ | 6,496 | $ | 5,651 | |||||
Worldwide Communications & Services | 15,769 | 15,099 | 8,543 | ||||||||
Corporate | 3,493 | 3,373 | 2,960 | ||||||||
$ | 37,495 | $ | 24,968 | $ | 17,154 | ||||||
Operating income: | |||||||||||
Worldwide Barcode, Networking & Security | $ | 56,911 | $ | 49,727 | $ | 52,227 | |||||
Worldwide Communications & Services | 10,900 | 39,768 | 45,513 | ||||||||
Corporate(1) | (172 | ) | (1,256 | ) | (863 | ) | |||||
$ | 67,639 | $ | 88,239 | $ | 96,877 | ||||||
Capital expenditures: | |||||||||||
Worldwide Barcode, Networking & Security | $ | 4,841 | $ | 3,796 | $ | 5,298 | |||||
Worldwide Communications & Services | 1,964 | 3,163 | 3,923 | ||||||||
Corporate | 1,354 | 1,890 | 2,860 | ||||||||
$ | 8,159 | $ | 8,849 | $ | 12,081 | ||||||
Sales by Geography Category: | |||||||||||
United States | $ | 2,877,225 | $ | 2,719,413 | $ | 2,655,760 | |||||
International(2) | 999,245 | 882,446 | 920,098 | ||||||||
Less intercompany sales | (30,210 | ) | (33,673 | ) | (35,632 | ) | |||||
$ | 3,846,260 | $ | 3,568,186 | $ | 3,540,226 | ||||||
June 30, 2018 | June 30, 2017 | ||||||
(in thousands) | |||||||
Assets: | |||||||
Worldwide Barcode, Networking & Security | $ | 1,062,143 | $ | 885,786 | |||
Worldwide Communications & Services | 841,490 | 769,342 | |||||
Corporate | 41,662 | 63,175 | |||||
$ | 1,945,295 | $ | 1,718,303 | ||||
Property and equipment, net by Geography Category: | |||||||
United States | $ | 69,032 | $ | 51,853 | |||
International | 4,010 | 4,713 | |||||
$ | 73,042 | $ | 56,566 |
(15) | Accumulated Other Comprehensive (Loss) Income |
Fiscal Years Ended June 30, | |||||||||||
2018 | 2017 | 2016 | |||||||||
(in thousands) | |||||||||||
Currency translation adjustment | $ | (85,279 | ) | $ | (73,217 | ) | $ | (72,687 | ) | ||
Unrealized gain on fair value of interest rate swap, net of tax | 1,102 | 13 | — | ||||||||
Accumulated other comprehensive loss | $ | (84,177 | ) | $ | (73,204 | ) | $ | (72,687 | ) |
Fiscal years ended June 30, | |||||||||||
2018 | 2017 | 2016 | |||||||||
(in thousands) | |||||||||||
Tax expense (benefit) | $ | 1,993 | $ | (396 | ) | $ | 327 | ||||
(16) | Subsequent Events |
ITEM 9. | Changes In and Disagreements with Accountants on Accounting and Financial Disclosure. |
ITEM 9A. | Controls and Procedures. |
ITEM 9B. | Other Information. |
ITEM 10. | Directors, Executive Officers and Corporate Governance. |
ITEM 11. | Executive Compensation. |
ITEM 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. |
ITEM 13. | Certain Relationships and Related Transactions, and Director Independence. |
ITEM 14. | Principal Accountant Fees and Services. |
ITEM 15. | Exhibits and Financial Statement Schedules. |
ITEM 16. | FORM 10-K SUMMARY |
Description | Balance at Beginning of Period | Amounts Charged to Expense | Reductions (1) | Other (2) | Balance at End of Period | |||||||||||
Allowance for bad debt: | ||||||||||||||||
Year ended June 30, 2016 | $ | 32,589 | 7,571 | (3,829 | ) | 2,701 | $ | 39,032 | ||||||||
Trade and current note receivable allowance | $ | 39,032 | ||||||||||||||
Year ended June 30, 2017 | $ | 39,032 | 8,901 | (3,860 | ) | 361 | $ | 44,434 | ||||||||
Trade and current note receivable allowance | $ | 44,434 | ||||||||||||||
Year ended June 30, 2018 | $ | 44,434 | 7,075 | (5,610 | ) | (338 | ) | $ | 45,561 | |||||||
Trade and current note receivable allowance | $ | 45,561 |
(1) | "Reductions" amounts represent write-offs for the years indicated. |
(2) | "Other" amounts include recoveries and the effect of foreign currency fluctuations for years ended June 30, 2018, 2017 and 2016. The amount in 2018 includes $0.1 million in accounts receivable reserves acquired with the POS Portal acquisition on July 31, 2017. The amount in 2017 includes $0.6 million of recoveries and $0.3 million of accounts receivable reserves acquired with the Intelisys acquisition on August 29, 2017. In addition, the amount in 2016 includes $1.5 million of recoveries and $1.2 million of accounts receivable reserves acquired with KBZ on September 4, 2016. |
SCANSOURCE , INC. | ||
By: | /s/ MICHAEL L. BAUR | |
Michael L. Baur | ||
Chief Executive Officer |
Signature | Title | Date | ||
/s/ STEVEN R. FISCHER | Chairman of the Board | August 28, 2018 | ||
Steven R. Fischer | ||||
/s/ MICHAEL L. BAUR | Chief Executive Officer and Director | August 28, 2018 | ||
Michael L. Baur | (principal executive officer) | |||
/s/ GERALD LYONS | Executive Vice President and Chief Financial Officer | August 28, 2018 | ||
Gerald Lyons | (principal financial officer and principal accounting officer) | |||
/s/ PETER C. BROWNING | Director | August 28, 2018 | ||
Peter C. Browning | ||||
/s/ MICHAEL J. GRAINGER | Director | August 28, 2018 | ||
Michael J. Grainger | ||||
/s/ JOHN P. REILLY | Director | August 28, 2018 | ||
John P. Reilly | ||||
/s/ ELIZABETH O. TEMPLE | Director | August 28, 2018 | ||
Elizabeth O. Temple | ||||
/s/ CHARLES R. WHITCHURCH | Director | August 28, 2018 | ||
Charles R. Whitchurch | ||||
Exhibit Index | ||||||||||
Exhibit Number | Description | Filed herewith | Form | Exhibit | Filing Date | |||||
2.1 | 8-K | 10.1 | 8/15/2014 | |||||||
2.2 | 10-Q | 2.1 | 2/3/2015 | |||||||
2.3+ | 10-Q | 10.1 | 11/7/2016 | |||||||
2.4+ | 10-K | 2.5 | 8/29/2017 | |||||||
3.1 | 10-Q | 3.1 | 2/3/2005 | |||||||
3.2 | 10-Q | 3.2 | 5/7/2014 | |||||||
4.1 | Form of Common Stock Certificate | SB-2 | 4.1 | 2/7/1994 | ||||||
Executive Compensation Plans and Arrangements | ||||||||||
10.1 | 10-Q | 10.4 | 11/2/2012 | |||||||
10.2 | 10-Q | 10.3 | 5/6/2011 | |||||||
10.3 | 10-Q | 10.1 | 2/3/2015 | |||||||
10.4 | 8-K | 10.1 | 12/7/2009 | |||||||
10.5 | S-8 | 99 | 12/5/2013 | |||||||
10.6 | S-8 | 99 | 12/5/2013 | |||||||
10.7 | 10-Q | 10.2 | 5/6/2011 | |||||||
10.8 | 8-K | 10.3 | 6/21/2017 | |||||||
10.9 | 8-K | 10.3 | 12/7/2009 | |||||||
10.10 | 10-Q | 10.2 | 2/4/2011 | |||||||
10.11 | 8-K | 10.4 | 12/7/2009 | |||||||
10.12 | 10-Q | 10.3 | 2/4/2011 |
10.13 | 8-K | 10.2 | 12/7/2009 | |||||||
10.14 | 10-Q | 10.5 | 2/4/2011 | |||||||
10.15 | 10-Q | 10.1 | 2/4/2009 | |||||||
10.16 | 10-Q | 10.2 | 2/4/2009 | |||||||
10.17 | 10-Q | 10.3 | 2/4/2009 | |||||||
10.18 | 10-Q | 10.1 | 2/6/2014 | |||||||
10.19 | 10-Q | 10.2 | 2/6/2014 | |||||||
10.20 | 10-Q | 10.3 | 2/6/2014 | |||||||
10.21 | 10-Q | 10.4 | 2/6/2014 | |||||||
10.22 | 10-K | 10.33 | 8/28/2014 | |||||||
10.23 | 10-K | 10.34 | 8/28/2014 | |||||||
10.24 | 8-K | 10.1 | 12/8/2017 | |||||||
10.25 | 8-K | 10.2 | 12/8/2017 | |||||||
10.26 | 8-K | 10.3 | 12/8/2017 | |||||||
10.27 | 8-K | 10.4 | 12/8/2017 | |||||||
10.28 | 8-K | 10.1 | 6/21/2017 | |||||||
10.29 | 10-K | 10.24 | 8/28/2014 | |||||||
10.30 | 8-K | 10.2 | 6/21/2017 | |||||||
10.31 | 8-K | 10.1 | 8/24/2017 |
10.32 | X | |||||||||
Bank Agreements | ||||||||||
10.33 | 10-Q | 10.1 | 11/4/2011 | |||||||
10.34 | 8-K | 10.1 | 11/8/2013 | |||||||
10.35 | 8-K | 10.1 | 12/14/2015 | |||||||
10.36 | 8-K | 10.1 | 4/5/2017 | |||||||
10.37 | 8-K | 10.1 | 8/9/2017 | |||||||
Other Agreements | ||||||||||
10.38+ | 10-K | 10.26 | 8/29/2007 | |||||||
10.39+ | 10-K | 10.54 | 8/29/2016 | |||||||
10.40+ | 10-K | 10.39 | 8/26/2010 | |||||||
10.41+ | 10-K | 10.37 | 8/26/2013 | |||||||
10.42+ | 10-K/A | 10.38 | 1/31/2014 | |||||||
10.43+ | 10-K | 10.52 | 8/29/2016 | |||||||
10.44+ | 10-K | 10.53 | 8/29/2016 | |||||||
10.45+ | 10-Q | 10.1 | 5/9/2017 | |||||||
10.46+ | 10-Q | 10.1 | 5/9/2017 | |||||||
10.47+ | 10-Q/A | 10.1 | 10/24/2014 | |||||||
10.48+ | 10-K | 10.50 | 8/29/2016 | |||||||
10.49+ | 10-K | 10.51 | 8/29/2016 | |||||||
10.50+ | 10-K | 10.51 | 8/29/2017 | |||||||
21.1 | X | |||||||||
23.1 | X | |||||||||
31.1 | X | |||||||||
31.2 | X | |||||||||
32.1 | X | |||||||||
32.2 | X |
101 | The following materials from our Annual Report on Form 10-K for the year ended June 30, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets as of June 30, 2018 and June 30, 2017, (ii) the Consolidated Income Statements for the years ended June 30, 2018, June 30, 2017 and June 30, 2016, (iii) the Consolidated Statements of Shareholders' Equity for the years ended June 30, 2018, June 30, 2017 and June 30, 2016, (iv) the Consolidated Statements of Cash Flows for the years ended June 30, 2018, June 30, 2017 and June 30, 2016, and (v) the Notes to the Consolidated Financial Statements, tagged as blocks of text | X | ||||||||
+ | Confidential treatment has been requested or granted with respect to certain portions of this Exhibit, which portions have been omitted and filed separately with the Commission as part of an application for confidential treatment. | |||||||||
Our SEC file number for documents filed with the SEC pursuant to the Securities Exchange Act of 1934, as amended, is 000-26926. |
Retainer (All Directors) | $85,000 |
Equity Grant Value (All Directors) | $130,000 |
Board Chair Retainer | $70,000 |
Audit Committee Chair Retainer | $25,000 |
Compensation Committee Chair Retainer | $15,000 |
Compensation for Other Committee Retainer | $5,000 |
Name of Subsidiary | State/Country of Incorporation | |
4100 Quest, LLC | South Carolina | |
ScanSource Properties, LLC | South Carolina | |
Logue Court Properties, LLC | South Carolina | |
8650 Commerce Drive, LLC | Mississippi | |
Partner Services, Inc. | South Carolina | |
ScanSource Security Distribution, Inc. | South Carolina | |
ScanSource Communications, Inc. | South Carolina | |
ScanSourceGov, Inc. | South Carolina | |
ScanSource Canada, Inc. | Canada | |
Intelisys, Inc. | South Carolina | |
ScanSource Payments, Inc. | South Carolina | |
POS Portal, Inc. | California | |
ScanSource de Mexico S, de R.L. de C.V. | Mexico | |
Outsourcing Unlimited, Inc. | Georgia | |
ScanSource Latin America, Inc. | Florida | |
ScanSource France SARL | France | |
ScanSource Europe Limited | United Kingdom | |
ScanSource UK Limited | United Kingdom | |
ScanSource Limited | United Kingdom | |
ScanSource Europe SPRL | Belgium1 | |
ScanSource Germany GmbH | Germany | |
ScanSource Communications Limited | United Kingdom | |
ScanSource Europe CV | Amsterdam/NL | |
ScanSource Europe BV | Amsterdam/NL | |
ScanSource Communications GmbH | Germany | |
ScanSource Brasil Distribuidora de Tecnologias Ltda. | Brazil | |
ScanSource Video Communications Limited | United Kingdom | |
ScanSource Video Communications Europe Limited | United Kingdom | |
Video Corporation Limited | United Kingdom | |
ScanSource Video Communications SARL | France | |
Network 1 International Colombia S.A.S | Colombia | |
Importadora y Comercializadora Network 1 International (Chile) Limitada | Chile | |
Network 1 International Peru SAC | Peru | |
Intersmart S. de R.L. de C.V. | Mexico | |
Intersmart Technologies LLC | Florida |
1 | ScanSource Europe SPRL has branch offices that operate under the names ScanSource Europe Italia, ScanSource Netherlands and ScanSource Poland. |
/s/ Grant Thornton LLP |
1. | I have reviewed this annual report on Form 10-K of ScanSource, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Michael L. Baur | |
Michael L. Baur, Chief Executive Officer (Principal Executive Officer) |
1. | I have reviewed this annual report on Form 10-K of ScanSource, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Gerald Lyons | |
Gerald Lyons, Executive Vice President and Chief Financial Officer (Principal Financial Officer) |
1) | The Report fully complies with the requirements of §13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”); and |
2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | August 28, 2018 | /s/ Michael L. Baur |
Michael L. Baur, | ||
Chief Executive Officer (Principal Executive Officer) |
1) | The Report fully complies with the requirements of §13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”); and |
2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | August 28, 2018 | /s/ Gerald Lyons |
Gerald Lyons | ||
Executive Vice President and Chief Financial Officer (Principal Financial Officer) |
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end
Document and Entity Information - USD ($) |
12 Months Ended | ||
---|---|---|---|
Jun. 30, 2018 |
Aug. 24, 2018 |
Dec. 31, 2017 |
|
Document And Entity Information | |||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Period End Date | Jun. 30, 2018 | ||
Document Fiscal Year Focus | 2018 | ||
Document Fiscal Period Focus | FY | ||
Entity Registrant Name | SCANSOURCE, INC. | ||
Entity Central Index Key | 0000918965 | ||
Current Fiscal Year End Date | --06-30 | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Common Stock, Shares Outstanding | 25,593,917 | ||
Entity Current Reporting Status | Yes | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Public Float | $ 910,611,127 |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Jun. 30, 2017 |
---|---|---|
Current assets: | ||
Allowance for accounts receivable | $ 45,561 | $ 44,434 |
Shareholders’ equity: | ||
Preferred stock, par value (in dollars per share) | $ 0 | $ 0 |
Preferred stock, shares authorized (in shares) | 3,000,000 | 3,000,000 |
Preferred stock, shares issued (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0 | $ 0 |
Common stock, shares authorized (in shares) | 45,000,000 | 45,000,000 |
Common stock, shares issued (in shares) | 25,593,122 | 25,431,845 |
Common stock, shares outstanding (in shares) | 25,593,122 | 25,431,845 |
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Statement of Comprehensive Income [Abstract] | |||
Net income | $ 33,153 | $ 69,246 | $ 63,619 |
Unrealized gain on hedged transaction, net of tax | 1,089 | 13 | 0 |
Foreign currency translation adjustment | (12,062) | (530) | (8,185) |
Comprehensive income | $ 22,180 | $ 68,729 | $ 55,434 |
Business and Summary of Significant Accounting Policies |
12 Months Ended | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2018 | |||||||||||||
Accounting Policies [Abstract] | |||||||||||||
Business and Summary of Significant Accounting Policies | Business and Summary of Significant Accounting Policies Business Description ScanSource, Inc. (together with its subsidiaries referred to as “the Company” or “ScanSource”) is at the center of the solution delivery channel, connecting businesses and providing technology solutions. The Company brings technology solutions and services from the world’s leading suppliers of point-of-sale (POS), payments, barcode, physical security, unified communications and collaboration and cloud and telecom services to market. The Company operates in the Unites States, Canada, Latin America and Europe. The Company's two operating segments, Worldwide Barcode, Networking & Security and Worldwide Communications & Services, are based on product, customer and service type. Consolidation Policy The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant inter-company accounts and transactions have been eliminated. Related Party Transactions A related party is generally defined as (i) any person that holds 10% or more of the Company’s securities and their immediate families, (ii) the Company’s management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company or (iv) anyone who can significantly influence the financial and operating decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. There were no material related party transactions for the fiscal years ended June 30, 2018, 2017 and 2016. Use of Estimates The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates, including those related to the allowance for uncollectible accounts receivable, contingent consideration and inventory reserves. Management bases its estimates on assumptions that management believes to be reasonable under the circumstances, the results of which form a basis for making judgments about the carrying value of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates under different assumptions or conditions; however, management believes that its estimates, including those for the above described items, are reasonable and that the actual results will not vary significantly from the estimated amounts. The following significant accounting policies relate to the more significant judgments and estimates used in the preparation of the Consolidated Financial Statements: (a) Allowances for Trade and Notes Receivable The Company maintains an allowance for uncollectible accounts receivable for estimated losses resulting from customers’ failure to make payments on accounts receivable due to the Company. Management determines the estimate of the allowance for uncollectible accounts receivable by considering a number of factors, including: (1) historical experience, (2) aging of the accounts receivable, (3) specific information obtained by the Company on the financial condition and the current creditworthiness of its customers and (4) the current economic and country specific environment. If the financial condition of the Company’s customers were to deteriorate and reduce the ability of the Company’s customers to make payments on their accounts, the Company may be required to increase its allowance by recording additional bad debt expense. Likewise, should the financial condition of the Company’s customers improve and result in payments or settlements of previously reserved amounts, the Company may be required to record a reduction in bad debt expense to reverse the recorded allowance. (b) Inventory Reserves Management determines the inventory reserves required to reduce inventories to the lower of cost or net realizable value based principally on the effects of technological changes, quantities of goods, length of time on hand and other factors. An estimate is made of the net realizable value, less cost to dispose, of products whose value is determined to be impaired. If these products are ultimately sold at less than estimated amounts, additional reserves may be required. The estimates used to calculate these reserves are applied consistently. The adjustments are recorded in the period in which the loss of utility of the inventory occurs, which establishes a new cost basis for the inventory. This new cost basis is maintained until such time that the reserved inventory is disposed of, returned to the supplier or sold. To the extent that specifically reserved inventory is sold, cost of goods sold is expensed for the new cost basis of the inventory sold. (c) Purchase Price Allocations For each acquisition, the Company allocates the purchase price to assets acquired, liabilities assumed and goodwill and intangibles in accordance with the FASB's Accounting Standards Codification ("ASC") 805. The Company recognizes assets and liabilities acquired at their estimated fair values. Management uses judgment to (1) identify the acquired assets and liabilities assumed, (2) estimate the fair value of these assets, (3) estimate the useful life of the assets and (4) assess the appropriate method for recognizing depreciation or amortization expense over the asset’s useful life. (d) Goodwill Fair Value The Company estimates the fair value of its goodwill reporting units primarily based on the income approach utilizing the discounted cash flow method. The Company also utilizes fair value estimates derived from the market approach utilizing the public company market multiple method to validate the results of the discounted cash flow method, which requires it to make assumptions about the applicability of those multiples to its reporting units. The discounted cash flow method requires the Company to estimate future cash flows, using key assumptions such as the weighted average cost of capital, revenue growth rates, projected gross margin and operating margin percentage growth, expected working capital changes and a related cash flow impact from working capital changes, and then discount those amounts to present value. Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less, when purchased, to be cash equivalents. The Company maintains some zero-balance disbursement accounts at various financial institutions in which the Company does not maintain significant depository relationships. Due to the terms of the agreements governing these accounts, the Company does not have the right to offset most if not all outstanding checks written from these accounts against cash on hand and the respective institutions are not legally obligated to honor the checks until sufficient funds are transferred to fund the checks. As a result, checks released but not yet cleared from these accounts in the amounts of $5.7 million and $8.3 million are classified as accounts payable as of June 30, 2018 and 2017, respectively. The Company maintains its cash with various financial institutions globally that are monitored regularly for credit quality and holds amounts in excess of Federal Deposit Insurance Corporation ("FDIC") limits or other insured limits. Cash and cash equivalents held outside of the United States totaled $20.3 million and $47.9 million as of June 30, 2018 and 2017, respectively. Concentration of Credit Risk The Company sells to a large base of customers throughout the United States, Canada, Latin America and Europe. The Company performs ongoing credit evaluations of its customers’ financial condition. In certain cases, the Company will accept tangible assets as collateral to increase the trade credit of its customers. In addition, the Company carries credit insurance on certain subsections of the customer portfolio. No single customer accounted for more than 6% of the Company’s net sales for fiscal years 2018. No single customer accounted for more than 5% of the Company's net sales for fiscal 2017 or 2016. In the event that the Company does not collect payment on accounts receivable within the established trade terms for certain customers, the Company may establish arrangements for longer-term financing. The Company accounts for these arrangements by recording them at their historical cost less specific allowances at balance sheet dates. Interest income is recognized in the period earned and is recorded as interest income in the Consolidated Income Statement. Derivative Financial Instruments The Company uses derivative instruments to manage certain exposures related to fluctuations in foreign currency exchange rates and changes in interest rates in connection with borrowing activities. The Company records all derivative instruments as either assets or liabilities in the Consolidated Balance Sheet at fair value. The Company does not use derivative financial instruments for trading or speculative purposes. The Company’s foreign currency exposure results from purchasing and selling internationally in several foreign currencies and from intercompany loans with foreign subsidiaries. The Company's foreign currencies are denominated primarily in Brazilian reais, euros, British pounds, Canadian dollars, Mexican pesos, Colombian pesos, Chilean pesos and Peruvian nuevos sols. The Company may reduce its exposure to fluctuations in foreign exchange rates by creating offsetting positions through the use of derivative financial instruments. The market risk related to the foreign exchange agreements is offset by changes in the valuation of the underlying items. These contracts are generally for a duration of 90 days or less. The Company has elected not to designate its foreign currency contracts as hedging instruments. They are, therefore, marked-to-market with changes in their fair value recorded in the Consolidated Income Statement each period. Derivative financial instruments related to foreign currency exposure are accounted for on an accrual basis with gains or losses on these contracts recorded in income in the period in which their value changes, with the offsetting entry for unsettled positions reflected in either other assets or other liabilities. The Company's earnings are affected by changes in interest rates due to the impact those changes have on interest expense from floating rate debt instruments. To manage the exposure, the Company has entered into an interest rate swap agreement and designated this instrument as a hedge of the cash flows on certain variable rate debt. To the extent the derivative instrument was effective in offsetting the variability of the hedged cash flows, changes in the fair value of the derivative instrument were not included in current earnings, but were reported as other comprehensive income (loss). There was no ineffective portion to be recorded as an adjustment to earnings for the year ended June 30, 2018. Investments The Company has investments that are held in a grantor trust formed by the Company related to the ScanSource, Inc. Nonqualified Deferred Compensation Plan and Founder’s Supplemental Executive Retirement Plan ("SERP"). The Company has classified these investments as trading securities, and they are recorded at fair value with unrealized gains and losses included in the accompanying Consolidated Income Statements. The Company’s obligations under this deferred compensation plan change in concert with the performance of the investments along with contributions to and withdrawals from the plan. The fair value of these investments and the corresponding deferred compensation obligation was $23.4 million and $21.4 million as of June 30, 2018 and June 30, 2017, respectively. These investments are classified as either prepaid expenses and current assets or other non-current assets in the Consolidated Balance Sheets depending on the timing of planned disbursements. The deferred compensation obligation is classified either within accrued expenses and other current liabilities or other long-term liabilities as well. The amounts of these investments classified as current assets with corresponding current liabilities were $1.6 million and $2.7 million at June 30, 2018 and June 30, 2017, respectively. Inventories Inventories (consisting entirely of finished goods) are stated at the lower of cost (first-in, first-out method) or net realizable value. Supplier Programs The Company receives incentives from suppliers related to cooperative advertising allowances, volume rebates and other incentive agreements. These incentives are generally under quarterly, semi-annual or annual agreements with the suppliers. Some of these incentives are negotiated on an ad hoc basis to support specific programs mutually developed between the Company and the supplier. Suppliers generally require that the Company use the suppliers' cooperative advertising allowances for advertising or other marketing programs. Incentives received from suppliers for specifically identified incremental cooperative advertising programs are recorded as adjustments to selling, general and administrative expenses. ASC 605 – Revenue Recognition addresses accounting by a customer for certain consideration received from a supplier. This guidance requires that the portion of these supplier funds in excess of our costs be reflected as a reduction of inventory. Such funds are recognized as a reduction of the cost of goods sold when the related inventory is sold. The Company records unrestricted volume rebates received as a reduction of inventory and reduces the cost of goods sold when the related inventory is sold. Amounts received or receivables from suppliers that are not yet earned are deferred in the Consolidated Balance Sheets. Supplier receivables are generally collected through reductions to accounts payable authorized by the supplier. In addition, the Company may receive early payment discounts from certain suppliers. The Company records early payment discounts received as a reduction of inventory, thereby resulting in a reduction of cost of goods sold when the related inventory is sold. ASC 605 requires management to make certain estimates of the amounts of supplier incentives that will be received. Actual recognition of the supplier consideration may vary from management estimates. Supplier Concentration The Company sells products from many suppliers, however, sales of products supplied by Avaya, Cisco and Zebra each constituted more than 10% of the Company’s net sales for the years ended June 30, 2018, 2017 and 2016. Product Warranty The Company’s suppliers generally provide a warranty on the products provided by the Company and allow the Company to return defective products, including those that have been returned to the Company by its customers. In three of its product lines, the Company offers a self-branded warranty program, in which management has determined that the Company is the primary obligor. The Company purchases contracts from unrelated third parties, generally the original equipment manufacturers, to fulfill any obligation to service or replace defective product claimed on these warranty programs. As a result, the Company has not recorded a provision for estimated service warranty costs. To maintain customer relations, the Company facilitates returns of defective products from the Company's customers by accepting for exchange, with the Company's prior approval, most defective products within 30 days of invoicing. Property and Equipment Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over estimated useful lives of 3 to 10 years for furniture, equipment and computer software, 25 to 40 years for buildings and 15 years for building improvements. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life. Maintenance, repairs and minor renewals are charged to expense as incurred. Additions, major renewals and betterments to property and equipment are capitalized. To the extent that the Company has longstanding, "in-process" projects that have not been implemented for their intended operational use, the Company capitalizes the portion of interest expense incurred during the asset's acquisition period that theoretically could have been avoided in accordance with ASC 835. The amount capitalized is determined by applying the appropriate capitalization rate to the average amount of accumulated expenditures for the asset during the reporting period. The capitalization rate used is based on the rates applicable to borrowings outstanding during the reporting period. The Company has not recorded any capitalized interest for the years ended June 30, 2018 and 2017. Capitalized Software The Company accounts for capitalized software in accordance with ASC 350-40, which provides guidance for computer software developed or obtained for internal use. The Company is required to continually evaluate the stage of the implementation process to determine whether or not costs are expensed or capitalized. Costs incurred during the preliminary project phase or planning and research phase are expensed as incurred. Costs incurred during the development phase, such as material and direct services costs, compensation costs of employees associated with the development and interest cost, are capitalized as incurred. Costs incurred during the post-implementation or operation phase, such as training and maintenance costs, are expensed as incurred. In addition, costs incurred to modify existing software that result in additional functionality are capitalized as incurred. Goodwill The Company accounts for recorded goodwill in accordance with ASC 350, Goodwill and Other Intangible Assets, which requires that goodwill be reviewed annually for impairment or more frequently if impairment indicators exist. Goodwill testing utilizes an impairment analysis, whereby the Company compares the carrying value of each identified reporting unit to its fair value. The Company's goodwill reporting units align directly with its operating segments, Worldwide Barcode, Networking & Worldwide Security and Communications & Services. The fair values of the reporting units are estimated using the net present value of discounted cash flows generated by each reporting unit. Considerable judgment is necessary in estimating future cash flows, discount rates and other factors affecting the estimated fair value of the reporting units, including the operating and macroeconomic factors. Historical financial information, internal plans and projections and industry information are used in making such estimates. Under ASU 2017-04 if fair value of goodwill is determined to be less than carrying value, an impairment loss is recognized for the amount of the carrying value that exceeds the amount of the reporting units' fair value, not to exceed the total amount of goodwill allocated to the reporting unit. Additionally, the Company would consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The Company also assesses the recoverability of goodwill if facts and circumstances indicate goodwill may be impaired. In its most recent annual test, the Company estimated the fair value of its reporting units primarily based on the income approach utilizing the discounted cash flow method. The Company also corroborated the fair value estimates derived from the income approach by considering the implied market multiples of comparable transactions and companies. The discounted cash flow method required the Company to estimate future cash flows and discount those amounts to present value. The key assumptions utilized in determining fair value included:
See Note 6 - Goodwill and Other Identifiable Intangible Assets for more information regarding goodwill and the results of our testing. Intangible Assets Intangible assets consist of customer relationships, trade names, distributor agreements, supplier partner programs, intellectual property, non-compete agreements and an encryption key library. Customer relationships, distributor agreements, supplier partner programs and the encryption key library are amortized using the straight-line method over their estimated useful lives, which range from 5 to 15 years. Trade names are amortized over a period ranging from 1 to 5 years. Non-compete agreements are amortized over their contract life. These assets are shown in detail in Note 6 - Goodwill and Other Identifiable Intangible Assets. Impairment of Long-Lived Assets The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset or asset group may not be recoverable. Tests for recoverability of a long-lived asset to be held and used are measured by comparing the carrying amount of the long-lived asset to the sum of the estimated future undiscounted cash flows expected to be generated by the asset. In estimating the future undiscounted cash flows, the Company uses projections of cash flows directly associated with, and which are expected to arise as a direct result of, the use and eventual disposition of the assets. If it is determined that a long-lived asset is not recoverable, an impairment loss would be calculated equal to the excess of the carrying amount of the long-lived asset over its fair value. Fair Value of Financial Instruments The fair value of financial instruments is the amount at which the instrument could be exchanged in a current transaction between willing parties. The carrying values of financial instruments such as accounts receivable, accounts payable, accrued liabilities, borrowings under the revolving credit facility and subsidiary lines of credit approximate fair value based upon either short maturities or variable interest rates of these instruments. For additional information related to the fair value of derivatives, please see Note 9 - Fair Value of Financial Instruments. Liability for Contingent Consideration In addition to the initial cash consideration paid to former shareholders of Network1 and Intelisys, the Company is obligated to make additional earnout payments based on future results through a specified date based on a multiple of the subsidiary’s pro forma earnings as defined in the respective purchase agreements. Future payments are to be paid in the functional currency of the acquired entity, which is the Brazilian real for Network1 and U.S. dollars for Intelisys. The Company paid the final earnout payment to the former shareholders of CDC during fiscal year 2016 and the final earnout payment to Imago during fiscal year 2017. The Company also made a single earnout payment to the former shareholders of POS Portal during fiscal year 2018 in accordance with the share purchase agreement. Network1 has one remaining earnout payment to be paid during fiscal year 2019. Intelisys has three remaining earnout payments to be paid in annual installments during fiscal years 2019 through 2021. In accordance with ASC Topic 805, the Company determines the fair value of this liability for contingent consideration at each reporting date throughout the term of the earnout using a form of a probability weighted discounted cash flow model. Each period the Company will reflect the contingent consideration liability at fair value with changes recorded in the change in fair value of contingent consideration line item on the Consolidated Income Statement. Current and noncurrent portions of the liability are presented in the current portion of contingent consideration and long-term portion of contingent consideration line items on the Consolidated Balance Sheets. Contingencies The Company accrues for contingent obligations, including estimated legal costs, when it is probable that a liability is incurred and the amount is reasonably estimable. As facts concerning contingencies become known, management reassesses its position and makes appropriate adjustments to the financial statements. Estimates that are particularly sensitive to future changes include tax, legal and other regulatory matters, which are subject to change as events evolve and as additional information becomes available during the administrative and litigation process. Revenue Recognition Revenue is recognized once four criteria are met: (1) the Company must have persuasive evidence that an arrangement exists; (2) delivery must occur (this includes the transfer of both title and risk of loss, provided that no significant obligations remain); (3) the price must be fixed and determinable; and (4) collectability must be reasonably assured. The Company allows its customers to return product for exchange or credit, subject to certain limitations. Taxes collected from customers and remitted to governmental authorities, such as sales taxes and value added taxes, are excluded from net sales. The Company provides third-party service contracts, typically for product maintenance and support. These service contracts are sold separately from the products, and the Company often serves as the agent for the contract on behalf of the original equipment manufacturer. Since the Company acts as an agent on behalf of most of these service contracts sold, revenue is recognized net of cost at the time of sale. However, the Company provides some self-branded warranty programs and engages a third party (generally the original equipment manufacturer) to cover the fulfillment of any obligations arising from these contracts. These revenues and associated third-party costs are amortized over the life of the contract and presented in net sales and cost of goods sold, respectively. Service revenue associated with third-party service contracts and warranty programs, as mentioned above, along with configuration and marketing services, is recognized when the work is complete and the four criteria discussed above have been met. Service revenue associated with service contracts, warranty programs, configuration, marketing and other services approximates 3% of consolidated net sales for fiscal years 2018, 2017 and 2016. The Company provides hardware and value added services for point of sale and payment equipment. This includes terminals, related accessories, financing, device configuration as well as software licenses, professional services and hardware support programs. The Company is the primary obligor for all hardware, software and services sold and recognizes such revenue and cost of goods sold on a gross basis. The revenue associated with rental offerings to customers is recognized in net sales and the cost associated with such offering is recognized as depreciation on the capitalized equipment in cost of goods sold in the Consolidated Income Statements. Through the Intelisys acquisition, the Company has a recurring revenue model in which the Company acts as a master agent partnering suppliers with sales agents to provide telecommunications and cloud services to end-users. As the Company acts as an agent on behalf of the suppliers' services, commission revenue received from the supplier is recognized net of cost associated with the commissions the Company pays to sales agents, at the time of sale. Revenue associated with the recurring revenue model approximates 1% of consolidated net sales for fiscal year 2018. During the fiscal years ended June 30, 2018, 2017 and 2016, the Company did not engage in sales transactions involving multiple element arrangements. Shipping Revenue and Costs Shipping revenue is included in net sales, and related costs are included in cost of goods sold. Shipping revenue was $19.9 million, $12.8 million and $13.0 million for the years ended June 30, 2018, 2017 and 2016. Advertising Costs The Company defers advertising-related costs until the advertising is first run in trade or other publications or, in the case of brochures, until the brochures are printed and available for distribution or posted online. Advertising costs, net of supplier reimbursement are included in selling, general and administrative expenses, were not significant in any of the three fiscal years ended June 30, 2018, 2017 and 2016. Deferred advertising costs for any of these three fiscal years were also not significant. Foreign Currency The currency effects of translating the financial statements of the Company’s foreign entities that operate in their local currency are included in the cumulative currency translation adjustment component of accumulated other comprehensive income or loss. The Company's functional currencies include U.S. dollars, Brazilian reais, euros, British pounds, Colombian pesos and Canadian dollars. The assets and liabilities of these foreign entities are translated into U.S. dollars using the exchange rate at the end of the respective period. Sales, costs and expenses are translated at average exchange rates effective during the respective period. Foreign currency transactional and re-measurement gains and losses are included in other expense (income) in the Consolidated Income Statements. Such amounts are not significant to any of the periods presented. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred income taxes reflect tax consequences on future years of differences between the tax bases of assets and liabilities and their financial reporting amounts. In accordance with ASC 740, Accounting for Income Taxes valuation allowances are provided against deferred tax assets when it is more likely than not that an asset will not be realized. Additionally, the Company maintains reserves for uncertain tax provisions. On December 22, 2017, the U.S. government enacted the Tax Cuts and Jobs Act (the "Tax Act"). The Company has accounted for changes in the tax provision in accordance with the new law. In response to the Tax Act, the Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) that provides guidance on accounting for the impact of the Tax Act. SAB 118 allows companies to record provisional amounts to the extent reasonably estimable and adjust them over time as more information becomes available, not to extend beyond the measurement period of one year from the enactment of the Tax Act. Accordingly, the Company has recorded provisional amounts for the one-time transition tax on the deemed repatriation of undistributed foreign earnings and the remeasurment of deferred tax assets and liabilities. The final impact from the enactment of the Tax Act may differ from the estimates provided for a number of reasons including, but not limited to, the issuance of final regulations, interpretation of the law and refinement of the Company's ongoing analysis of the new tax positions. Any changes in the provisional amount recognized will be reflected in the income tax expense in the period they are identified. See Note 12 - Income Taxes for further discussion. Share-Based Payments The Company accounts for share-based compensation using the provisions of ASC 718, Accounting for Stock Compensation, which requires the recognition of the fair value of share-based compensation. Furthermore, the Company adopted ASU 2016-09 which simplified several aspects of the accounting share-based compensation, including income tax effects, forfeitures, statutory withholding requirements and cash flow statement classifications. Share-based compensation is estimated at the grant date based on the fair value of the awards. Since this compensation cost is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. ASU 2016-09 allows companies to elect an accounting policy either to continue to estimate the total number of awards for which the requisite service period will not be rendered or to account for forfeitures when they occur. The Company has elected to maintain its current accounting policy, estimate the total number of awards expected to be forfeited at the time of grant and revise such estimates, if necessary, in subsequent periods if actual forfeitures differ. The Company has elected to expense grants of awards with graded vesting on a straight-line basis over the requisite service period for each separately vesting portion of the award. Common stock repurchases Repurchases of common stock are accounted for at cost, which includes brokerage fees, and are included as a component of shareholder's equity on the Consolidated Balance Sheets. In August 2014, our Board of Directors authorized a three-year $120 million share repurchase program. Through June 30, 2016, the Company completed the program, repurchasing 3.4 million shares totaling approximately $119.5 million. In August 2016, the Board of Directors authorized a new three-year $120 million share repurchase program. During the year ended June 30, 2017, the Company repurchased 0.6 million shares totaling approximately $20.3 million. There were no share repurchases during the year ended June 30, 2018. Comprehensive Income ASC 220, Comprehensive Income, defines comprehensive income as the change in equity (net assets) of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. The components of comprehensive income for the Company include net income, unrealized gains or losses on hedged transactions, net of tax and foreign currency translation adjustments arising from the consolidation of the Company’s foreign subsidiaries. The loss from foreign currency translation adjustment increased for the year ended June 30, 2018 as compared to the prior year largely due to the significant fluctuations in the Brazilian real year-over-year. Business Combinations The Company accounts for business combinations in accordance with ASC 805, Business Combinations. ASC 805 establishes principles and requirements for recognizing the total consideration transferred to and the assets acquired, liabilities assumed and any non-controlling interest in the acquired target in a business combination. ASC 805 also provides guidance for recognizing and measuring goodwill acquired in a business combination and requires the acquirer to disclose information that users may need to evaluate and understand the financial impact of the business combination. See Note 5 - Acquisitions for further discussion. Reclassifications Certain reclassifications have been made on the Consolidated Statements of Cash Flows to show taxes paid on settlement of equity awards separately from exercise of stock options under cash flows from financing activities. Prior year balances have been reclassified to conform with current year presentation. These reclassifications had no effect on consolidated financial results. Recent Accounting Pronouncements In May 2014, the FASB issued a comprehensive new revenue recognition standard for contracts with customers that will supersede most current revenue recognition guidance, including industry-specific guidance. The core principle of this standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, the standard provides a five-step analysis of transactions to determine when and how revenue is recognized. Other major provisions include the capitalization and amortization of certain contract costs, ensuring the time value of money is considered in the transaction price and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. This guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The new standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. The standard permits the use of either the retrospective or cumulative effect transition method. The Company adopted this guidance for the fiscal year beginning July 1, 2018 using the full retrospective transition method. The Company engaged a third-party consultant to assist with developing a multi-phase plan to assess the impact of adoption. The Company does not expect the adoption of ASC 606 to have a material impact to the financial statements and is currently in the process of finalizing policy and procedure documentation around the adoption of the standard. Additionally, the Company is in the process of evaluating the impact of the expanded disclosure requirements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) requiring lessees to reflect most leases on their balance sheets and recognize expenses on their income statements in a manner similar to current guidance. Under the new guidance, lessees will be required to recognize a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis, and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The asset will be measured at the lease liability amount, adjusted for lease prepayments, lease incentives received and the lessee's initial direct costs. For leases with a lease term of 12 months or less, as long as the lease does not include options to purchase the underlying assets, lessees can elect not to recognize a lease liability and right-of-use asset. Under the new guidance, lessor accounting is largely unchanged, and the accounting for sale and leaseback transactions is simplified. The standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. This guidance will be applicable to the Company for the fiscal year beginning July 1, 2019. The guidance can be adopted using a modified retrospective approach or a cumulative-effect adjustment to the opening balance sheet of retained earnings in the period of adoption for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. The Company is currently evaluating the impact on its consolidated financial statements upon the adoption of this new guidance. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) intended to reduce diversity in practice of how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The update addresses eight specific cash flow issues, with the treatment of contingent consideration payments made after a business combination being the most directly applicable to the Company. The update requires that cash payments made approximately three months or less after an acquisition's consummation date should be classified as cash outflows for investing activities. Payment made thereafter up to the amount of the original contingent consideration liability should be classified as cash outflows from financing activities. Payments made in excess of the amount of the original contingent consideration liability should be classified as cash outflows from operating activities. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years and early adoption is permitted. The standard will be applicable to the Company for the fiscal year beginning July 1, 2018. The guidance requires adoption using a retrospective transition method. Upon adoption, the Company expects to retroactively reclassify cash outflows between financing activities and operating activities related to contingent consideration payments in excess of the originally valued contingent consideration liability at the date of acquisition. In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815) that amends and simplifies guidance related to hedge accounting to more accurately portray the economics of an entity’s risk management activities in its financial statements. The standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted in any interim or annual period. This guidance will be applicable to the Company for the fiscal year beginning July 1, 2019. The guidance requires adoption using a modified retrospective approach. The presentation and disclosure requirements apply prospectively. The Company is currently evaluating the impact on its consolidated financial statements upon the adoption of this new guidance. The Company has reviewed other newly issued accounting pronouncements and concluded that they are either not applicable to its business or that no material effect is expected on its consolidated financial statements as a result of future adoption. |
Earnings per Share |
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Earnings per Share | Earnings per Share Basic earnings per share are computed by dividing net income by the weighted-average number of common shares outstanding. Diluted earnings per share are computed by dividing net income by the weighted-average number of common and potential common shares outstanding.
For the years ended June 30, 2018, 2017 and 2016, weighted-average shares outstanding excluded from the computation of diluted earnings per share because their effect would have been antidilutive were 551,320, 418,325 and 461,090, respectively. |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and Equipment | Property and Equipment Property and equipment is comprised of the following:
During the fiscal year ended June 30, 2018, the increase in net fixed assets from the prior year is largely due to net assets acquired during the POS Portal acquisition. Depreciation expense recorded as selling, general and administrative costs in the accompanying Consolidated Income Statements was $13.3 million, $9.4 million and $7.3 million for the fiscal years ended 2018, 2017 and 2016, respectively. Depreciation expense recorded as cost of goods sold in the accompanying Consolidated Income Statements was $3.5 million for the fiscal year ended June 30, 2018. There was no depreciation expense recorded as cost of goods sold prior to the acquisition of POS Portal on July 31, 2017. |
Accrued Expenses and Other Current Liabilities |
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Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Expenses and Other Current Liabilities | Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities is comprised of the following:
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Acquisitions |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions | Acquisitions POS Portal On July 31, 2017, the Company acquired all of the outstanding shares of POS Portal a leading provider of payment devices and services primarily to the small and midsized ("SMB") market segment in the United States. POS Portal joined the Worldwide Barcode, Networking & Security segment. Under the share purchase agreement, the all-cash transaction included an initial purchase price of approximately $144.9 million paid in cash at closing. The Company paid an additional $3.4 million for customary closing adjustments during the six months ended December 31, 2017. The Company acquired $4.6 million in cash, net of debt payoff and other customary closing adjustments, resulting in $143.8 million net cash paid for POS Portal. The agreement also included a cash earn-out payment up to $13.2 million based on POS Portal's earnings before interest expense, taxes, depreciation and amortization (EBITDA) for the trailing twelve months (TTM) ended September 30, 2017, which was paid in full during the quarter ended December 31, 2017. A portion of the purchase price was placed into escrow to indemnify the Company for certain pre-acquisition damages. A portion of the escrow was released during the quarter ended December 31, 2017. As of June 30, 2018, the balance available in escrow was $13.1 million. In connection with the POS Portal acquisition during fiscal 2018, the Company recognized $0.2 million in acquisition-related cost included in selling, general and administrative expenses on the Consolidated Income Statements. The purchase price of this acquisition was allocated to the assets acquired and liabilities assumed based on their estimated fair values on the transaction date. Purchase accounting for this acquisition was finalized during the quarter ended December 31, 2017. The goodwill balance is primarily attributed to expanding the Company's high-value capabilities and market reach across all payment channels. Goodwill, identifiable intangible assets and the related deferred tax liability are not deductible for tax purposes. Pro forma results of operations have not been presented for the acquisition of POS Portal because such results are not material to our consolidated results.
Intangible assets acquired include trade names, customer relationships, non-compete agreements and an encryption key library. The weighted-average amortization period for these identified assets after purchase accounting adjustments, other than goodwill, was 10 years. Intelisys On August 29, 2016, the Company acquired substantially all the assets of Intelisys, a technology services company with voice, data, cable, wireless and cloud services. Intelisys is part of the Company's Worldwide Communications & Services operating segment. With this acquisition, the Company broadened its capabilities in the telecom and cloud services market and expands its opportunities for high-growth recurring revenue. Under the asset purchase agreement, the Company made an initial cash payment of approximately $84.6 million, which consisted of an initial purchase price of $83.6 million and $1.0 million for additional net assets acquired at closing, and agreed to make four additional annual cash installments based on a form of adjusted EBITDA for the periods ending June 30, 2017 through June 30, 2020. The Company acquired $0.8 million of cash as part of the acquisition, resulting in $83.8 million net cash paid for Intelisys initially. A portion of the purchase price was placed into escrow to indemnify the Company for certain pre-acquisition damages. As of June 30, 2018, the balance available in escrow was $8.5 million. During fiscal years 2017 and 2016, the Company recognized $0.5 million and $0.3 million, respectively, in acquisition-related cost included in selling, general and administrative expenses on the Consolidated Income Statements. The purchase price of this acquisition was allocated to the assets acquired and liabilities assumed based on their estimated fair values on the transaction date. The goodwill balance is primarily attributed to entering the recurring revenue telecom and cloud services market and expanded market opportunities to grow recurring revenue streams. Goodwill and identifiable intangible assets are expected to be fully deductible for tax purposes.
Intangible assets acquired include customer relationships, trade names, intellectual property and non-compete agreements. The weighted-average amortization period for these identified intangible assets after purchase accounting adjustments, other than goodwill, was 10 years. |
Goodwill and Other Identifiable Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Other Identifiable Intangible Assets | Goodwill and Other Identifiable Intangible Assets In accordance with ASC 350, Intangibles - Goodwill and Other Intangible Assets, the Company performs its annual goodwill impairment test during the fourth quarter of each fiscal year, or whenever indicators of impairment are present. The reporting units utilized for goodwill impairment tests align directly with our operating segments, Worldwide Barcode, Networking & Security and Worldwide Communications & Services. The testing includes the determination of each reporting unit's fair value using a discounted cash flows model compared to each reporting unit's carrying value. Key assumptions used in determining fair value include projected growth and operating margin, working capital requirements and discount rates. During fiscal years ended June 30, 2018, 2017 and 2016, no impairment charges related to goodwill were recorded. Changes in the carrying amount of goodwill for the years ended June 30, 2018 and 2017, by reportable segment, are set forth in the table below. Additions to goodwill for fiscal years 2018 and 2017 are due to the acquisitions of POS Portal and Intelisys, respectively.
The following table shows the Company’s identifiable intangible assets as of June 30, 2018 and 2017, respectively.
During fiscal year 2018, the Company acquired customer relationships, trade names, intellectual property, non-compete agreements and an encryption key library related to the acquisition of POS Portal. The weighted-average amortization period for all intangible assets was approximately 10 years for years ended June 30, 2018, 2017 and 2016, respectively. Amortization expense for the years ended June 30, 2018, 2017 and 2016 was $20.7 million, $15.5 million and $9.8 million, respectively, all of which relates to selling, general and administrative costs, not the cost of selling goods, and has been presented as such in the accompanying Consolidated Income Statements. Estimated future amortization expense is as follows:
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Short-Term Borrowings and Long-Term Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Short-Term Borrowings and Long-Term Debt | Short-Term Borrowings and Long-Term Debt The following table shows the Company’s long term debt as of June 30, 2018 and 2017, respectively.
Revolving Credit Facility The Company has a multi-currency senior secured revolving credit facility with JPMorgan Chase Bank N.A., as administrative agent, and a syndicate of banks (the “Amended Credit Agreement”). On April 3, 2017, the Company amended this credit facility to extend its maturity to April 3, 2022. On August 8, 2017, the Company amended this credit facility to increase the committed amount from $300 million to $400 million. The Amended Credit Agreement allows for the issuance of up to $50 million for letters of credit and has a $200 million accordion feature that allows the Company to increase the availability to $600 million, subject to obtaining additional credit commitments from the lenders participating in the increase. The Company incurred debt issuance costs of $0.9 million and $0.3 million in connection with the amendments to the Amended Credit Agreement on April 3, 2017 and August 8, 2017, respectively. These costs were capitalized to other assets on the Condensed Consolidated Balance Sheets and added to the unamortized debt issuance costs from the previous credit facility. At the Company's option, loans denominated in U.S. dollars under the Amended Credit Agreement, other than swingline loans, bear interest at a rate equal to a spread over the London Interbank Offered Rate ("LIBOR") or alternate base rate depending upon the Company's ratio of total debt (excluding accounts payable and accrued liabilities), measured as of the end of the most recent quarter, to adjusted earnings before interest expense, taxes, depreciation and amortization ("EBITDA") for the most recently completed four quarters (the "Leverage Ratio"). This spread ranges from 1.00% to 2.125% for LIBOR-based loans and 0.00% to 1.125% for alternate base rate loans. Additionally, the Company is assessed commitment fees ranging from 0.175% to 0.35%, depending upon the Leverage Ratio, on non-utilized borrowing availability, excluding swingline loans. Borrowings under the Amended Credit Agreement are guaranteed by substantially all of the domestic assets of the Company and a pledge of up to 65% of capital stock or other equity interest in certain foreign subsidiaries determined to be either material or a subsidiary borrower as defined in the Amended Credit Agreement. The spread in effect as of June 30, 2018 was 1.625% for LIBOR-based loans and 0.625% for alternate base rate loans. The commitment fee rate in effect as of June 30, 2018 was 0.25%. The Company was in compliance with all covenants under the credit facility as of June 30, 2018. The average daily balance on the revolving credit facility during the fiscal years ended June 30, 2018 and 2017 was $269.5 million and $126.5 million, respectively. There was $156.0 million and $208.1 million available for additional borrowings as of June 30, 2018 and 2017, respectively. There were no letters of credit issued under the multi-currency revolving credit facility as of June 30, 2018 and June 30, 2017. Long-Term Debt On August 1, 2007, the Company entered into an agreement with the State of Mississippi in order to provide financing for the acquisition and installation of certain equipment to be utilized at the Company’s Southaven, Mississippi facility through the issuance of an industrial development revenue bond. The bond matures on September 1, 2032 and accrues interest at a rate equal to 30-day LIBOR plus a spread of 0.85%. The terms of the bond allow for payment of interest only for the first 10 years of the agreement and then, starting on September 1, 2018 through 2032, principal and interest payments are due until the maturity date or the redemption of the bond. The agreement also provides the bondholder with a put option, exercisable only within 180 days of each 5th anniversary of the agreement, requiring the Company to pay back the bonds at 100% of the principal amount outstanding. As of June 30, 2018, the Company was in compliance with all covenants under this bond. The interest rate at June 30, 2018 and 2017 was 2.855% and 1.926%, respectively. Scheduled maturities of the Company’s revolving credit facility and long-term debt at June 30, 2018 are as follows:
Debt Issuance Costs As of June 30, 2018, net debt issuance costs associated with the credit facility and bonds totaled $1.3 million and are being amortized on a straight-line basis through the maturity date of each respective debt instrument. |
Derivatives and Hedging Activities |
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General Discussion of Derivative Instruments and Hedging Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivatives and Hedging Activities | Derivatives and Hedging Activities The Company’s results of operations could be materially impacted by significant changes in foreign currency exchange rates and interest rates. In an effort to manage the exposure to these risks, the Company periodically enters into various derivative instruments. The Company’s accounting policies for these instruments are based on whether the instruments are designated as hedge or non-hedge instruments in accordance with U.S. GAAP. The Company records all derivatives on the consolidated balance sheet at fair value. Derivatives that are not designated as hedging instruments or the ineffective portions of cash flow hedges are adjusted to fair value through earnings in other income and expense. Foreign Currency Derivatives – The Company conducts a portion of its business internationally in a variety of foreign currencies. The exposure to market risk for changes in foreign currency exchange rates arises from foreign currency denominated assets and liabilities and transactions arising from non-functional currency financing or trading activities. The Company’s objective is to preserve the economic value of non-functional currency denominated cash flows. The Company attempts to hedge transaction exposures with natural offsets to the fullest extent possible and once these opportunities have been exhausted the Company uses currency options and forward contracts or other hedging instruments with third parties. These contracts will periodically hedge the exchange of various currencies, including the U.S. dollar, Brazilian real, euro, British pound, Canadian dollar, Mexican peso, Colombian peso, Chilean peso and Peruvian nuevo sol. While the Company utilizes foreign exchange contracts to hedge foreign currency exposure, the Company's foreign exchange policy prohibits the use of derivative financial instruments for speculative purposes. The Company had contracts outstanding with notional amounts of $74.6 million and $67.1 million for the exchange of foreign currencies as of June 30, 2018 and 2017, respectively. To date, the Company has chosen not to designate these derivatives as hedging instruments, and accordingly, these instruments are adjusted to fair value through earnings in other income and expense. Summarized financial information related to these derivative contracts and changes in the underlying value of the foreign currency exposures are as follows:
Net foreign exchange gains and losses consist of foreign currency transactional and functional currency re-measurements, offset by net foreign currency exchange contract gains and losses and are included in other income and expense. Foreign exchange gains and losses are generated as the result of fluctuations in the value of the U.S. dollar versus the Brazilian real, the U.S. dollar versus the euro, British pound versus the euro and other currencies versus the U.S. dollar. Interest Rates – The Company’s earnings are also affected by changes in interest rates due to the impact those changes have on interest expense from floating rate debt instruments. To manage the exposure to interest rates, the Company entered into an interest rate swap agreement with a notional amount of $50 million scheduled to mature on April 3, 2022. This swap agreement is designated as a cash flow hedge to hedge the variable rate interest payments on the revolving credit facility. Interest rate differentials paid or received under the swap agreement are recognized as adjustments to interest expense. To the extent the swap is effective in offsetting the variability of the hedged cash flows, changes in the fair value of the swap are not included in current earnings but are reported as other comprehensive income (loss). There was no ineffective portion to be recorded as an adjustment to earnings for fiscal years ended June 30, 2018 and 2017. The components of the cash flow hedge included in accumulated other comprehensive income (loss), net of income taxes, in the Consolidated Statements of Shareholders’ Equity, are as follows:
The Company has the following derivative instruments located on the Consolidated Balance Sheets and Income Statements as of June 30, 2018, utilized for the risk management purposes detailed above:
The Company has the following derivative instruments located on the Consolidated Balance Sheets and Income Statements as of June 30, 2017, utilized for the risk management purposes detailed above:
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Fair Value of Financial Instruments |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments | Fair Value of Financial Instruments Accounting guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Under this guidance, the Company is required to classify certain assets and liabilities based on the fair value hierarchy, which groups fair value-measured assets and liabilities based upon the following levels of inputs:
The assets and liabilities maintained by the Company that are required to be measured at fair value on a recurring basis include deferred compensation plan investments, forward foreign currency exchange contracts, interest rate swap agreements and contingent consideration owed to the previous owners of Network1 and Intelisys. The carrying value of debt listed in Note 7 - Short-Term Borrowings and Long Term Debt is considered to approximate fair value, as the Company's debt instruments are indexed to a variable rate using the market approach (Level 2 criteria). The following table summarizes the valuation of the Company's remaining assets and liabilities measured at fair value on a recurring basis as of June 30, 2018:
The following table presents assets and liabilities measured at fair value on a recurring basis as of June 30, 2017:
The investments in the deferred compensation plan are held in a "rabbi trust" and include mutual funds and cash equivalents for payment of non-qualified benefits for certain retired, terminated or active employees. These investments are recorded to prepaid and other current assets or other non-current assets depending on their corresponding, anticipated distributions to recipients, which are reported in accrued expenses and other current liabilities or other long-term non-current liabilities, respectively. Derivative instruments, such as foreign currency forward contracts, are measured using the market approach on a recurring basis considering foreign currency spot rates and forward rates quoted by banks or foreign currency dealers and interest rates quoted by banks (Level 2). Fair values of interest rate swaps are measured using standard valuation models with inputs that can be derived from observable market transactions, including LIBOR spot and forward rates (Level 2). Foreign currency contracts and interest rate swap agreements are classified in the Consolidated Balance Sheet as prepaid expenses and other current assets or accrued expenses and other current liabilities, depending on the respective instruments' favorable or unfavorable positions. See Note 8 - Derivatives and Hedging Activities. The Company recorded contingent consideration liabilities at the acquisition date of Network1, Intelisys and POS Portal representing the amounts payable to former shareholders, as outlined under the terms of the applicable purchase agreements, based upon the achievement of a projected earnings measure, net of specific pro forma adjustments. The current and non-current portions of these obligations are reported separately on the Consolidated Balance Sheets. The fair value of the contingent considerations (Level 3) are determined using a form of a probability weighted discounted cash flow model. Subsequent changes in the fair value of the contingent consideration liabilities are recorded to the change in fair value of contingent consideration line item in the Consolidated Income Statements. Fluctuations due to foreign currency translation are captured in other comprehensive income through the changes in foreign currency translation adjustments line item as seen in Note 15 - Accumulated Other Comprehensive (Loss) Income. POS Portal is part of the Company's Worldwide Barcode, Networking & Security Segment. Network1 and Intelisys are part of the Company's Worldwide Communications & Services segment. The table below provides a summary of the changes in fair value of the Company’s contingent considerations for the Network1, Intelisys and POS Portal earnouts, which is measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the fiscal year ended June 30, 2018. The contingent consideration due to the former shareholders of POS Portal was paid in full during the quarter ended December 31, 2017.
(1) The contingent consideration payable to the former shareholders of Network1 has been reduced by payments the Company made to settle pre-acquisition contingencies during the quarter ended June 30, 2018. The table below provides a summary of the changes in fair value of the Company’s contingent considerations for the Imago, Network1 and Intelisys earnouts, which is measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the fiscal year ended June 30, 2017:
The fair values of amounts owed are recorded in the current portion of contingent consideration and the long-term portion of contingent consideration in the Company's Consolidated Balance Sheets. The U.S. dollar amounts of actual disbursements made in conjunction with future earnout payments are subject to change as the liability is denominated in currencies other than the U.S. dollar and subject to foreign exchange fluctuation risk. In accordance with ASC 805, the Company will revalue the contingent consideration liability at each reporting date through the last payment, with changes in the fair value of the contingent consideration reflected in the change in fair value of contingent consideration line item on the Company's Consolidated Income Statement that is included in the calculation of operating income. The fair value of the contingent consideration liability associated with future earnout payments is based on several factors, including:
A change in any of these unobservable inputs can significantly change the fair value of the contingent consideration. Valuation techniques and significant observable inputs used in recurring Level 3 fair value measurements for our contingent consideration liabilities as of June 30, 2018 and 2017 were as follows.
The weighted average cost of capital ("WACC") decreased year-over-year largely due to the reduction in the WACC used for the Network1 contingent consideration liability as the earnout period is complete as of June 30, 2018. Worldwide Barcode, Networking & Security Segment POS Portal The contingent consideration due to the former shareholders of POS Portal was paid in full during the quarter ended December 31, 2017. As such, no liability is recorded as of this reporting date. The change in the fair value of the contingent consideration recognized in the Consolidated Income Statements for the fiscal year ended June 30, 2018 was a loss less than $0.1 million. CDC The final payment of the contingent consideration related to CDC was paid during the fiscal year ended June 30, 2016. The change in fair value of the contingent consideration recognized in the Consolidated Income Statements was a loss of $0.2 million for the fiscal year ended June 30, 2016. The loss was due to the recurring amortization of unrecognized fair value discount. Worldwide Communications & Services Segment Network1 The fair value of the liability for the contingent consideration related to Network1 recognized at June 30, 2018 was $10.7 million of which the entire balance is classified as current. The change in fair value of the contingent consideration recognized in the Consolidated Income Statements contributed a loss of $21.0 million for the fiscal year ended June 30, 2018, which is primarily due to a change in estimate of the current year payment to the former shareholders of Network1, additional agreed upon adjustments to the projected final settlement and improved actual results for the fiscal year. In addition, volatility in the foreign exchange between the Brazilian real and the U.S. dollar has driven changes in the translation of this Brazilian real denominated liability. As of June 30, 2017, the fair value of the contingent consideration was $6.9 million, of which $5.4 million was classified as current. The change in fair value of the contingent consideration recognized in the Consolidated Income Statements was a gain of $5.8 million for the fiscal year ended June 30, 2017, which was largely driven by a reduction in future projected results and less-than-expected actual results, partially offset by the recurring amortization of the unrecognized fair value discount. Intelisys The fair value of the liability for the contingent consideration related to Intelisys recognized at June 30, 2018 was $97.5 million of which $32.2 million is classified as current. The change in fair value of the contingent consideration recognized in the Consolidated Income Statements contributed a loss of $16.0 million for the fiscal year ended June 30, 2018, which was primarily due to the recurring amortization of the unrecognized fair value discount and an adjustment to the probability weights in the discounted cash flow model. Although there is no contractual limit, total future undiscounted contingent consideration payments are anticipated to range up to $115.3 million, based on the Company’s best estimate of the earnout calculated on a multiple of adjusted earnings. The fair value of the liability for the contingent consideration related to Intelisys recognized at June 30, 2017 was $107.1 million of which $25.3 million is classified as current. The change in fair value of the contingent consideration recognized in the Consolidated Income Statements contributed a loss of $12.1 million for the fiscal year ended June 30, 2017, which was largely driven by the recurring amortization of the unrecognized fair value discount and improvements in projected results. Imago The final payment of the contingent consideration related to Imago was paid during the quarter ended December 31, 2016. The change in fair value of contingent consideration recognized in the Consolidated Income Statements contributed a gain of $1.1 million for the fiscal year ended June 30, 2017, which was largely driven by actual results that were less-than-expected, including special adjustments as determined by the purchase agreement and recurring amortization of the unrecognized fair value discount. In addition, volatility in the foreign exchange rate between the British pound and the U.S. dollar drove changes in the translation of this British pound-denominated liability. Scheduled maturities of the Company’s contingent considerations at June 30, 2018 are as follows:
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Share-Based Compensation |
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Share-based Compensation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Compensation | Share-Based Compensation Share-Based Compensation Plans The Company has awards outstanding from two share-based compensation plans (the 2002 Long-Term Incentive Plan and the 2013 Long-Term Incentive Plan). Awards are currently only being granted under the 2013 Long-Term Incentive Plan. As of June 30, 2018, there were 3,786,727 shares available for future grant under the 2013 Long-Term Incentive Plan. All of the Company’s share-based compensation plans are shareholder approved, and it is the Company’s belief that such awards align the interests of its employees and directors with those of its shareholders. Under the plans, the Company is authorized to award officers, employees, consultants and non-employee members of the Board of Directors various share-based payment awards, including options to purchase common stock and restricted stock. Restricted stock can be in the form of a restricted stock award ("RSA"), restricted stock unit ("RSU") or a performance unit ("PU"). An RSA is common stock that is subject to risk of forfeiture or other restrictions that lapse upon satisfaction of specified conditions. An RSU represents the right to receive shares of common stock in the future with the right to future delivery of the shares subject to risk of forfeiture or other restrictions that lapse upon satisfaction of specified conditions. The Company accounts for its share-based compensation awards in accordance with ASC 718 – Stock Compensation, which requires all share-based compensation to be recognized in the income statement based on fair value and applies to all awards granted, modified, canceled or repurchased after the effective date. Total share-based compensation included as a component of selling, general and administrative expenses in our Consolidated Income Statements was as follows:
Stock Options During the fiscal year ended June 30, 2018, the Company granted stock options for 119,132 shares. These options vest annually over 3 years and have a 10-year contractual life. These options were granted with an exercise price that is no less than 100% of the fair market value of the underlying shares on the date of the grant. The fair value of each option (for purposes of calculation of share-based compensation) was estimated on the date of grant using the Black-Scholes-Merton option pricing formula that uses assumptions determined at the date of grant. Use of this option pricing model requires the input of subjective assumptions. These assumptions include estimating the length of time employees will retain their vested stock options before exercising them ("expected term"), the estimated volatility of the Company's common stock price over the expected term ("expected volatility") and the number of options that will ultimately not complete their vesting requirements ("forfeitures"). Changes in the subjective assumptions can materially affect the estimate of the fair value of share-based compensation and, consequently, the related amount recognized in the Consolidated Income Statements. The Company used the following weighted-average assumptions for the options granted during the following fiscal years:
The weighted-average expected term of the options represents the period of time the options are expected to be outstanding based on historical trends and behaviors of certain groups and individuals receiving these awards. The expected volatility is predominantly based on the historical volatility of our common stock for a period approximating the expected term. The risk-free interest rate reflects the interest rate at grant date on zero-coupon United States governmental bonds that have a remaining life similar to the expected option term. The dividend yield assumption was based on the Company's dividend payment history and management's expectations of future dividend payments. A summary of activity under our stock option plans is presented below:
The aggregate intrinsic value was calculated using the market price of the Company's stock on June 30, 2018, and the exercise price for only those options that have an exercise price that is less than the market price of our stock. This amount will change as the market price per share changes. The aggregate intrinsic value of options exercised during the fiscal years ended June 30, 2018, 2017 and 2016 was $0.5 million, $1.6 million and $1.3 million, respectively. A summary of the status of the Company’s shares subject to unvested options is presented below:
As of June 30, 2018, there was approximately $1.6 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the plans in the form of stock options. This cost is expected to be recognized over a weighted-average period of 1.12 years. The total fair value of options vested during the fiscal years ended June 30, 2018, 2017 and 2016 is $1.3 million, $1.5 million and $1.5 million, respectively. The following table summarizes information about stock options outstanding and exercisable as of June 30, 2018:
The Company issues shares to satisfy the exercise of options. Restricted Stock Grants of Restricted Shares During the fiscal year ended June 30, 2018, the Company granted 138,665 shares of restricted stock to employees and non-employee directors, all of which were issued in the form of RSUs or PUs:
(1) The RSU's granted on February 1, 2018 contains both service and performance-based vesting conditions for the period January 1, 2018 through December 31, 2020 (the "performance cycle") as determined by the Compensation Committee of the Company's Board of Directors. The total number for target shares granted could differ from the actual shares vested at the conclusion of the performance cycle. See the Company's 2018 Proxy Statement for more information about these grants. (2) Under the 2013 Long-Term Incentive Plan, non-employee directors receive annual awards of restricted stock, as opposed to stock options. The number of shares of restricted stock to be granted is established from time to time by the Board of Directors. Currently, the number of shares of restricted stock awarded annually to each non-employee director generally is determined by dividing $100,000 by the equity award value of the common stock on the date of grant, as defined in the 2013 Long-Term Incentive Plan. The equity award value means the value per share based on a 45-day averaging of the fair market value of the common stock over a specified period of time, or the fair market value of the common stock on a specified date. These awards will generally vest in full on the day that is six months after the date of grant or upon the earlier occurrence of (i) the director’s termination of service as a director by reason of death, disability or retirement or (ii) a change in control by the Company. The compensation expense associated with these awards will be recognized on a pro-rata basis over this period. A summary of the status of the Company’s outstanding restricted stock is presented below:
(1) These target shares granted as RSUs during fiscal year 2015 have service based and performance based vesting conditions. The actual number of shares granted for each of the three tranches, for the period June 1, 2014 through June 30, 2017, is determined after the date of the Company's financial statements. Therefore, the adjustment recognized during fiscal year 2018 represents the variance between the shares assumed to be granted versus at June 30, 2017 the actual shares granted for the third tranche. As of June 30, 2018, there was approximately $6.6 million of unrecognized compensation cost related to unvested restricted stock awards and restricted stock units granted, which is expected to be recognized over a weighted-average period of 1.23 years. The Company withheld 47,470 shares for income taxes during the fiscal year ended June 30, 2018. |
Employee Benefit Plans |
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Defined Benefit Plans and Other Postretirement Benefit Plans Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Employee Benefit Plans | Employee Benefit Plans The Company has defined contribution plans under Section 401(k) of the Internal Revenue Code of 1986. One plan governs all employees located in the United States, excluding POS Portal employees, that meet certain eligibility requirements and provides a matching contribution equal to one-half of each participant’s contribution, up to a maximum matching contribution per participant of $800. Employer contributions are vested based upon tenure over a five-year period. The Company also assumed POS Portal's defined contribution plan upon acquisition, which provides a matching contribution equal to 100% of each participant's contribution, up to a maximum of 4%. The Company's employer contributions under the POS Portal plan vest immediately.
Internationally, the Company contributes to either plans required by local governments or to various employee annuity plans. Additionally, the Company maintains a non-qualified, unfunded deferred compensation plan that allows eligible executives to defer a portion of their compensation in addition to receiving discretionary matching contributions from the Company. Employer contributions are vested over a five-year period. |
Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes On December 22, 2017, the U.S. government enacted the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act reduces the corporate federal tax rate from 35% to 21% effective January 1, 2018 and implements a modified territorial tax system. Since the Company has a June 30th fiscal year-end, the lower tax rate resulted in a blended U.S. statutory federal rate of approximately 28% for the fiscal year ended June 30, 2018. The U.S. statutory federal rate will be 21% for subsequent fiscal years. As part of of the Tax Act, U.S. companies are required to pay a one-time transition tax on the deemed repatriation of undistributed foreign earnings and to remeasure deferred tax assets and liabilities. In response to the Tax Act, the Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) that provides guidance on accounting for the impact of the Tax Act. SAB 118 allows companies to record provisional amounts to the extent reasonably estimable and adjust them over time as more information becomes available, not to extend beyond the measurement period of one year from the enactment of the Tax Act. Accordingly, the Company has recorded provisional amounts for the one-time transition tax on the deemed repatriation of undistributed foreign earnings and the remeasurement of deferred tax assets and liabilities. The final impact from the enactment of the Tax Act may differ from the estimates provided for a number of reasons including, but not limited to, the issuance of final regulations, interpretation of the law and refinement of the Company's ongoing analysis of the new tax positions. Any changes in the provisional amount recognized will be reflected in the income tax expense in the period they are identified. The Tax Act includes a mandatory deemed repatriation of all undistributed foreign earnings that are subject to a U.S. income tax as part of the transition. For the fiscal year ended June 30, 2018, the Company recognized provisional income tax expense of $9.6 million for a one-time transition tax liability on total post-1986 foreign subsidiaries’ earnings and profits (“E&P”) that were previously deferred from U.S. income taxes. No additional income tax expense has been provided for any remaining undistributed foreign earnings not subject to the transition tax and any additional outside basis difference inherent for these entities as such amounts continue to be indefinitely reinvested in foreign operations. As part of accounting for the Tax Act, the Company remeasured certain deferred tax assets and liabilities based on the rates at which such deferred taxes are expected to reverse in the future, which is generally 21% . For the fiscal year ended June 30, 2018 the Company recognized provisional income tax benefit of $1.6 million for the remeasurement of the Company’s deferred tax asset and liability balances. Income tax expense (benefit) consists of:
A reconciliation of the U.S. Federal income tax expense at a blended statutory rate of 28% for the fiscal year ended June 30, 2018 and a statutory rate of 35% for the June 30, 2017 and 2016 fiscal years to actual income tax expense is as follows:
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are presented below:
The components of pretax earnings are as follows:
As of June 30, 2018, there were (i) gross net operating loss carryforwards of approximately $2.4 million for U.S. federal income tax purposes; (ii) gross state net operating loss carryforwards of approximately $4.1 million; (iii) foreign gross net operating loss carryforwards of approximately $17.8 million; (iv) state income tax credit carryforwards of approximately $2.2 million that will began to expire in the 2018 tax year; and (v) withholding tax credits of approximately $3.5 million; and (vi) foreign tax credits of $0.6 million. The Company maintains a valuation allowance of $0.6 million for foreign net operating losses, a less than $0.1 million valuation allowance for state net operating losses, a $3.5 million valuation allowance for withholding tax credits, a $0.6 million valuation allowance for foreign tax credits, and $0.3 million valuation allowance for state income tax credits, and a less than $0.1 million valuation allowance for the notional interest deduction, where it was determined that, in accordance with ASC 740, it is more likely than not that they cannot be utilized. The Company adopted ASU 2016-09 during fiscal year 2018 which required the Company to recognize excess tax benefits and tax deficiencies as income tax expense or benefit for stock award settlements that were previously recognized as additional paid-in-capital. As a result of these changes, the Company recognized net tax expense of $1.0 million for the fiscal year ended June 30, 2018. The one-time transition tax is based on the total post-1986 foreign subsidiaries’ earnings and profits (“E&P”) were previously deferred from U.S. income taxes. Prior to the passage of the Tax Act, the Company did not provide for U.S. income taxes for undistributed earnings of foreign subsidiaries that were considered to be retained indefinitely for reinvestment. The Company will continue to distribute the earnings of its Canadian subsidiary, but earnings from all other geographies will continue to be considered retained indefinitely for reinvestment. It has been the practice of the Company to reinvest those earnings in the business outside the United States. Apart from the one-time transition tax, any incremental deferred income taxes on the unremitted foreign earnings are not expected to be material. As of June 30, 2018, the Company had gross unrecognized tax benefits of $2.1 million, $1.4 million of which, if recognized, would affect the effective tax rate. This reflects a decrease of $0.1 million on a gross basis over the prior fiscal year. The Company does not expect that the total amounts of unrecognized tax benefits will significantly increase or decrease within the next twelve months. The Company recognizes interest and penalties related to unrecognized tax benefits within the income tax expense line in the accompanying Consolidated Income Statement. Accrued interest and penalties are included within the related tax liability line in the Consolidated Balance Sheet. The total amount of interest and penalties accrued, but excluded from the table below were $1.2 million for the fiscal year ending June 30, 2018 and $1.1 million for the fiscal year ended June 30, 2017 and $1.2 million for the fiscal year ended June 30, 2016, respectively. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Financial results for the Belgium business produced pre-tax loss of approximately $5.3 million for the year ended June 30, 2018. To the extent the Belgium business does not return to profitability as expected, this could affect the valuation of certain deferred tax assets. However, the Belgium business reported cumulative taxable income for two of the four prior years. In the judgment of management, the conditions that gave rise to the fiscal current year and prior year pre-tax losses are temporary and that it is more likely than not that the deferred tax asset will be realized. A corporate tax reform law was enacted in Belgium on December 25, 2017, which reduces the corporate tax rate from 33% to 25% over a three-year period. The company remeasured certain deferred tax assets and liabilities based on the rates at which such deferred taxes are expected to reverse in the future. As a result, the Company recognized income tax expense of $1.0 million during the year ended June 30, 2018. During the quarter ended June 30, 2017, a lawsuit filed by ScanSource Brazil with the Brazilian Supreme Court in 2014 regarding the tax treatment of certain Brazilian state-provided tax benefits was settled in Scansource Brazil’s favor. As a result, Scansource Brazil was awarded and recovered a tax settlement. The Company recorded, discrete to the June 30, 2017 quarter, the income tax benefit associated with that recovery equal to approximately $4.5 million. The Company conducts business globally and, as a result, one or more of its subsidiaries files income tax returns in the United States federal, various state, local and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities in countries in which it operates. With certain exceptions, the Company is no longer subject to state and local, or non-United States income tax examinations by tax authorities for tax years before June 30, 2013. |
Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | Commitments and Contingencies Leases The Company leases office and warehouse space under non-cancelable operating leases that expire through 2023. The Company also leases certain equipment under a capital lease that expires in 2020. Lease expense and future minimum lease payments under operating leases and capital leases are as follows:
On July 6, 2016, the Company entered into an amended agreement to continue to lease approximately 741,000 square feet for distribution, warehousing and storage purposes in a building located in Southaven, Mississippi. The term of the lease is 135 months with 2 consecutive 5-year extension options. On December 7, 2017 the Company entered into a new lease agreement and amended an existing lease agreement for certain information technology infrastructure located in the Greenville, South Carolina facility expiring in 2020. The Company determined each lease qualified as a capital lease and recorded a capital lease obligation equal to the present value of the minimum lease payments of $1.9 million in accordance. The components of the Company's capital lease as of June 30, 2018 are as follows:
Commitments and Contingencies A majority of the Company’s net revenues in fiscal years 2018, 2017 and 2016 were received from the sale of products purchased from the Company’s ten largest suppliers. The Company has entered into written agreements with substantially all of its major suppliers. While the Company’s agreements with most of its suppliers contain standard provisions for periodic renewals, these agreements generally permit termination by either party without cause upon 30 to 120 days' notice. The Company or its subsidiaries are, from time to time, parties to lawsuits arising out of operations. Although there can be no assurance, based upon information known to the Company, the Company believes that any liability resulting from an adverse determination of such lawsuits would not have a material adverse effect on the Company’s financial condition or results of operations. During fiscal year ended June 30, 2018, the Company recognized $2.9 million in proceeds from a legal tax settlement, net of attorney fees, in Brazil. Of the total settlement, $2.5 million is included in selling, general and administrative expenses and $0.4 million is included in interest income on the Consolidated Income Statements. During the fiscal year ended June 30, 2017, the Company recognized $12.8 million in proceeds from a legal settlement, net of attorney fees, included in other income (expense), net on the Consolidated Income Statements. Capital Projects The Company expects total capital expenditures to range from $10.0 million to $15.0 million during fiscal year 2019 primarily for rental equipment investments and facility improvements. Pre-Acquisition Contingencies During the Company's due diligence for the CDC acquisition, several pre-acquisition contingencies were identified regarding various Brazilian federal and state tax exposures. In connection with these contingencies, the Company recorded indemnification receivables that are reported gross of the pre-acquisition contingency liabilities as the funds were escrowed as part of the acquisition. The Company settled the single remaining pre-acquisition contingency of approximately $2.3 million for CDC during the quarter ended March 31, 2018 and paid the remaining escrow balance to the former shareholders of CDC. The table below summarizes the balances and line item presentation of CDC's pre-acquisition contingencies and corresponding indemnification receivables in the Company's consolidated balance sheet:
During the Company's due diligence for the Network1 acquisition, several pre-acquisition contingencies were identified regarding various Brazilian federal and state tax exposures. The Company recorded indemnification receivables that are reported gross of the pre-acquisition contingency liabilities as the funds were escrowed as part of the acquisition. The sellers deposited $12.3 million and $8.7 million into the escrow account for the years ended June 30, 2018 and 2017. The amount available after the impact of foreign currency translation, as of June 30, 2018 and 2017, for future pre-acquisition contingency settlements or to be released to the sellers was $24.1 million and $13.0 million, respectively. The table below summarizes the balances and line item presentation of Network1's pre-acquisition contingencies and corresponding indemnification receivables in the Company's consolidated balance sheet:
The net decline in the value of pre-acquisition contingencies for Network1 is primarily due to the expiration of the statute of limitations for identified pre-acquisition contingencies. The amount of reasonably possible undiscounted pre-acquisition contingencies as of June 30, 2018 is estimated to range from $6.7 million to $23.0 million at this time, of which all exposures are indemnifiable under the share purchase agreement. |
Segment Information |
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Segment Reporting, Measurement Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | Segment Information The Company is a leading provider of technology products and solutions to customers in specialty technology markets. The Company has two reportable segments, based on product, customer and service type. Worldwide Barcode, Networking & Security Segment The Worldwide Barcode, Networking & Security segment includes a portfolio of solutions primarily for enterprise mobile computing, data capture, barcode printing, POS, payments, networking, electronic physical security, cyber security and other technologies. We have business units within this segment in North America, Latin America and Europe. We see adjacencies among these technologies in helping our customers develop solutions. Data capture and POS solutions interface with computer systems used to automate the collection, processing and communication of information for commercial and industrial applications, including retail sales, distribution, shipping, inventory control, materials handling, warehouse management and health care applications. Electronic physical security products include identification, access control, video surveillance, intrusion-related and wireless and networking infrastructure products. Worldwide Communications & Services Segment The Worldwide Communications & Services segment includes a portfolio of solutions primarily for communications technologies and services. We have business units within this segment in North America, Latin America and Europe. These offerings include voice, video conferencing, wireless, data networking, cable, unified communications and collaboration, cloud and technology services. As these solutions come together on IP networks, new opportunities are created to move into adjacent solutions for all vertical markets, such as education, healthcare and government. Selected financial information for each business segment is presented below:
(1) For the years ended June 30, 2018, 2017 and 2016, the amounts shown above include acquisition costs. (2) For the years ended June 30, 2018, 2017 and 2016, there were no sales in excess of 10% of consolidated net sales to any single international country.
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Accumulated Other Comprehensive (Loss) Income |
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Accumulated Other Comprehensive (Loss) Income | Accumulated Other Comprehensive (Loss) Income The components of accumulated other comprehensive (loss) income, net of tax, are as follows:
The tax effect of amounts in comprehensive income (loss) reflect a tax expense or benefit as follows:
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Subsequent Events |
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Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events On August 20, 2018, the Company acquired Canpango, a global Salesforce implementation and consulting partner with deep knowledge of CRM and integration with telecom systems. Canpango’s professional services are complementary to our cloud services offerings. Canpango joins the Company's Worldwide Communications & Services operating segment. |
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SEC Schedule, 12-09, Valuation and Qualifying Accounts [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Valuation And Qualifying Accounts | SCHEDULE II SCANSOURCE, INC. AND SUBSIDIARIES Valuation and Qualifying Accounts (in thousands)
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Business and Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||
Business Description | Business Description ScanSource, Inc. (together with its subsidiaries referred to as “the Company” or “ScanSource”) is at the center of the solution delivery channel, connecting businesses and providing technology solutions. The Company brings technology solutions and services from the world’s leading suppliers of point-of-sale (POS), payments, barcode, physical security, unified communications and collaboration and cloud and telecom services to market. The Company operates in the Unites States, Canada, Latin America and Europe. The Company's two operating segments, Worldwide Barcode, Networking & Security and Worldwide Communications & Services, are based on product, customer and service type. |
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Consolidation Policy | Consolidation Policy The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant inter-company accounts and transactions have been eliminated. |
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Related Party Transactions | Related Party Transactions A related party is generally defined as (i) any person that holds 10% or more of the Company’s securities and their immediate families, (ii) the Company’s management, (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company or (iv) anyone who can significantly influence the financial and operating decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. |
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Use of Estimates | Use of Estimates The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates, including those related to the allowance for uncollectible accounts receivable, contingent consideration and inventory reserves. Management bases its estimates on assumptions that management believes to be reasonable under the circumstances, the results of which form a basis for making judgments about the carrying value of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates under different assumptions or conditions; however, management believes that its estimates, including those for the above described items, are reasonable and that the actual results will not vary significantly from the estimated amounts. |
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Allowances for Trade and Notes Receivable | Allowances for Trade and Notes Receivable The Company maintains an allowance for uncollectible accounts receivable for estimated losses resulting from customers’ failure to make payments on accounts receivable due to the Company. Management determines the estimate of the allowance for uncollectible accounts receivable by considering a number of factors, including: (1) historical experience, (2) aging of the accounts receivable, (3) specific information obtained by the Company on the financial condition and the current creditworthiness of its customers and (4) the current economic and country specific environment. If the financial condition of the Company’s customers were to deteriorate and reduce the ability of the Company’s customers to make payments on their accounts, the Company may be required to increase its allowance by recording additional bad debt expense. Likewise, should the financial condition of the Company’s customers improve and result in payments or settlements of previously reserved amounts, the Company may be required to record a reduction in bad debt expense to reverse the recorded allowance. |
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Inventory Reserves | Inventory Reserves Management determines the inventory reserves required to reduce inventories to the lower of cost or net realizable value based principally on the effects of technological changes, quantities of goods, length of time on hand and other factors. An estimate is made of the net realizable value, less cost to dispose, of products whose value is determined to be impaired. If these products are ultimately sold at less than estimated amounts, additional reserves may be required. The estimates used to calculate these reserves are applied consistently. The adjustments are recorded in the period in which the loss of utility of the inventory occurs, which establishes a new cost basis for the inventory. This new cost basis is maintained until such time that the reserved inventory is disposed of, returned to the supplier or sold. To the extent that specifically reserved inventory is sold, cost of goods sold is expensed for the new cost basis of the inventory sold |
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Purchase Price Allocations | Purchase Price Allocations For each acquisition, the Company allocates the purchase price to assets acquired, liabilities assumed and goodwill and intangibles in accordance with the FASB's Accounting Standards Codification ("ASC") 805. The Company recognizes assets and liabilities acquired at their estimated fair values. Management uses judgment to (1) identify the acquired assets and liabilities assumed, (2) estimate the fair value of these assets, (3) estimate the useful life of the assets and (4) assess the appropriate method for recognizing depreciation or amortization expense over the asset’s useful life. |
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Goodwill | Goodwill The Company accounts for recorded goodwill in accordance with ASC 350, Goodwill and Other Intangible Assets, which requires that goodwill be reviewed annually for impairment or more frequently if impairment indicators exist. Goodwill testing utilizes an impairment analysis, whereby the Company compares the carrying value of each identified reporting unit to its fair value. The Company's goodwill reporting units align directly with its operating segments, Worldwide Barcode, Networking & Worldwide Security and Communications & Services. The fair values of the reporting units are estimated using the net present value of discounted cash flows generated by each reporting unit. Considerable judgment is necessary in estimating future cash flows, discount rates and other factors affecting the estimated fair value of the reporting units, including the operating and macroeconomic factors. Historical financial information, internal plans and projections and industry information are used in making such estimates. Under ASU 2017-04 if fair value of goodwill is determined to be less than carrying value, an impairment loss is recognized for the amount of the carrying value that exceeds the amount of the reporting units' fair value, not to exceed the total amount of goodwill allocated to the reporting unit. Additionally, the Company would consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. The Company also assesses the recoverability of goodwill if facts and circumstances indicate goodwill may be impaired. In its most recent annual test, the Company estimated the fair value of its reporting units primarily based on the income approach utilizing the discounted cash flow method. The Company also corroborated the fair value estimates derived from the income approach by considering the implied market multiples of comparable transactions and companies. The discounted cash flow method required the Company to estimate future cash flows and discount those amounts to present value. The key assumptions utilized in determining fair value included:
Goodwill Fair Value The Company estimates the fair value of its goodwill reporting units primarily based on the income approach utilizing the discounted cash flow method. The Company also utilizes fair value estimates derived from the market approach utilizing the public company market multiple method to validate the results of the discounted cash flow method, which requires it to make assumptions about the applicability of those multiples to its reporting units. The discounted cash flow method requires the Company to estimate future cash flows, using key assumptions such as the weighted average cost of capital, revenue growth rates, projected gross margin and operating margin percentage growth, expected working capital changes and a related cash flow impact from working capital changes, and then discount those amounts to present value. |
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Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments with original maturities of three months or less, when purchased, to be cash equivalents. The Company maintains some zero-balance disbursement accounts at various financial institutions in which the Company does not maintain significant depository relationships. Due to the terms of the agreements governing these accounts, the Company does not have the right to offset most if not all outstanding checks written from these accounts against cash on hand and the respective institutions are not legally obligated to honor the checks until sufficient funds are transferred to fund the checks. As a result, checks released but not yet cleared from these accounts in the amounts of $5.7 million and $8.3 million are classified as accounts payable as of June 30, 2018 and 2017, respectively. The Company maintains its cash with various financial institutions globally that are monitored regularly for credit quality and holds amounts in excess of Federal Deposit Insurance Corporation ("FDIC") limits or other insured limits. |
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Concentration of Credit Risk | Concentration of Credit Risk The Company sells to a large base of customers throughout the United States, Canada, Latin America and Europe. The Company performs ongoing credit evaluations of its customers’ financial condition. In certain cases, the Company will accept tangible assets as collateral to increase the trade credit of its customers. In addition, the Company carries credit insurance on certain subsections of the customer portfolio. No single customer accounted for more than 6% of the Company’s net sales for fiscal years 2018. No single customer accounted for more than 5% of the Company's net sales for fiscal 2017 or 2016. In the event that the Company does not collect payment on accounts receivable within the established trade terms for certain customers, the Company may establish arrangements for longer-term financing. The Company accounts for these arrangements by recording them at their historical cost less specific allowances at balance sheet dates. Interest income is recognized in the period earned and is recorded as interest income in the Consolidated Income Statement. |
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Derivative Financial Instruments | Derivative Financial Instruments The Company uses derivative instruments to manage certain exposures related to fluctuations in foreign currency exchange rates and changes in interest rates in connection with borrowing activities. The Company records all derivative instruments as either assets or liabilities in the Consolidated Balance Sheet at fair value. The Company does not use derivative financial instruments for trading or speculative purposes. The Company’s foreign currency exposure results from purchasing and selling internationally in several foreign currencies and from intercompany loans with foreign subsidiaries. The Company's foreign currencies are denominated primarily in Brazilian reais, euros, British pounds, Canadian dollars, Mexican pesos, Colombian pesos, Chilean pesos and Peruvian nuevos sols. The Company may reduce its exposure to fluctuations in foreign exchange rates by creating offsetting positions through the use of derivative financial instruments. The market risk related to the foreign exchange agreements is offset by changes in the valuation of the underlying items. These contracts are generally for a duration of 90 days or less. The Company has elected not to designate its foreign currency contracts as hedging instruments. They are, therefore, marked-to-market with changes in their fair value recorded in the Consolidated Income Statement each period. Derivative financial instruments related to foreign currency exposure are accounted for on an accrual basis with gains or losses on these contracts recorded in income in the period in which their value changes, with the offsetting entry for unsettled positions reflected in either other assets or other liabilities. The Company's earnings are affected by changes in interest rates due to the impact those changes have on interest expense from floating rate debt instruments. To manage the exposure, the Company has entered into an interest rate swap agreement and designated this instrument as a hedge of the cash flows on certain variable rate debt. To the extent the derivative instrument was effective in offsetting the variability of the hedged cash flows, changes in the fair value of the derivative instrument were not included in current earnings, but were reported as other comprehensive income (loss). |
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Investments | Investments The Company has investments that are held in a grantor trust formed by the Company related to the ScanSource, Inc. Nonqualified Deferred Compensation Plan and Founder’s Supplemental Executive Retirement Plan ("SERP"). The Company has classified these investments as trading securities, and they are recorded at fair value with unrealized gains and losses included in the accompanying Consolidated Income Statements. The Company’s obligations under this deferred compensation plan change in concert with the performance of the investments along with contributions to and withdrawals from the plan. The fair value of these investments and the corresponding deferred compensation obligation was $23.4 million and $21.4 million as of June 30, 2018 and June 30, 2017, respectively. These investments are classified as either prepaid expenses and current assets or other non-current assets in the Consolidated Balance Sheets depending on the timing of planned disbursements. The deferred compensation obligation is classified either within accrued expenses and other current liabilities or other long-term liabilities as well. |
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Inventories | Inventories Inventories (consisting entirely of finished goods) are stated at the lower of cost (first-in, first-out method) or net realizable value. |
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Supplier Programs | Supplier Programs The Company receives incentives from suppliers related to cooperative advertising allowances, volume rebates and other incentive agreements. These incentives are generally under quarterly, semi-annual or annual agreements with the suppliers. Some of these incentives are negotiated on an ad hoc basis to support specific programs mutually developed between the Company and the supplier. Suppliers generally require that the Company use the suppliers' cooperative advertising allowances for advertising or other marketing programs. Incentives received from suppliers for specifically identified incremental cooperative advertising programs are recorded as adjustments to selling, general and administrative expenses. ASC 605 – Revenue Recognition addresses accounting by a customer for certain consideration received from a supplier. This guidance requires that the portion of these supplier funds in excess of our costs be reflected as a reduction of inventory. Such funds are recognized as a reduction of the cost of goods sold when the related inventory is sold. The Company records unrestricted volume rebates received as a reduction of inventory and reduces the cost of goods sold when the related inventory is sold. Amounts received or receivables from suppliers that are not yet earned are deferred in the Consolidated Balance Sheets. Supplier receivables are generally collected through reductions to accounts payable authorized by the supplier. In addition, the Company may receive early payment discounts from certain suppliers. The Company records early payment discounts received as a reduction of inventory, thereby resulting in a reduction of cost of goods sold when the related inventory is sold. ASC 605 requires management to make certain estimates of the amounts of supplier incentives that will be received. Actual recognition of the supplier consideration may vary from management estimates. |
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Supplier Concentration | Supplier Concentration The Company sells products from many suppliers, however, sales of products supplied by Avaya, Cisco and Zebra each constituted more than 10% of the Company’s net sales for the years ended June 30, 2018, 2017 and 2016. |
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Product Warranty | Product Warranty The Company’s suppliers generally provide a warranty on the products provided by the Company and allow the Company to return defective products, including those that have been returned to the Company by its customers. In three of its product lines, the Company offers a self-branded warranty program, in which management has determined that the Company is the primary obligor. The Company purchases contracts from unrelated third parties, generally the original equipment manufacturers, to fulfill any obligation to service or replace defective product claimed on these warranty programs. As a result, the Company has not recorded a provision for estimated service warranty costs. To maintain customer relations, the Company facilitates returns of defective products from the Company's customers by accepting for exchange, with the Company's prior approval, most defective products within 30 days of invoicing. |
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Property and Equipment | Property and Equipment Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over estimated useful lives of 3 to 10 years for furniture, equipment and computer software, 25 to 40 years for buildings and 15 years for building improvements. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life. Maintenance, repairs and minor renewals are charged to expense as incurred. Additions, major renewals and betterments to property and equipment are capitalized. To the extent that the Company has longstanding, "in-process" projects that have not been implemented for their intended operational use, the Company capitalizes the portion of interest expense incurred during the asset's acquisition period that theoretically could have been avoided in accordance with ASC 835. The amount capitalized is determined by applying the appropriate capitalization rate to the average amount of accumulated expenditures for the asset during the reporting period. The capitalization rate used is based on the rates applicable to borrowings outstanding during the reporting period. |
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Capitalized Software | Capitalized Software The Company accounts for capitalized software in accordance with ASC 350-40, which provides guidance for computer software developed or obtained for internal use. The Company is required to continually evaluate the stage of the implementation process to determine whether or not costs are expensed or capitalized. Costs incurred during the preliminary project phase or planning and research phase are expensed as incurred. Costs incurred during the development phase, such as material and direct services costs, compensation costs of employees associated with the development and interest cost, are capitalized as incurred. Costs incurred during the post-implementation or operation phase, such as training and maintenance costs, are expensed as incurred. In addition, costs incurred to modify existing software that result in additional functionality are capitalized as incurred. |
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Intangible Assets | Intangible Assets Intangible assets consist of customer relationships, trade names, distributor agreements, supplier partner programs, intellectual property, non-compete agreements and an encryption key library. Customer relationships, distributor agreements, supplier partner programs and the encryption key library are amortized using the straight-line method over their estimated useful lives, which range from 5 to 15 years. Trade names are amortized over a period ranging from 1 to 5 years. Non-compete agreements are amortized over their contract life. |
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Impairment of Long-Lived Assets | Impairment of Long-Lived Assets The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset or asset group may not be recoverable. Tests for recoverability of a long-lived asset to be held and used are measured by comparing the carrying amount of the long-lived asset to the sum of the estimated future undiscounted cash flows expected to be generated by the asset. In estimating the future undiscounted cash flows, the Company uses projections of cash flows directly associated with, and which are expected to arise as a direct result of, the use and eventual disposition of the assets. If it is determined that a long-lived asset is not recoverable, an impairment loss would be calculated equal to the excess of the carrying amount of the long-lived asset over its fair value. |
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Fair Value of Financial Instruments | Fair Value of Financial Instruments The fair value of financial instruments is the amount at which the instrument could be exchanged in a current transaction between willing parties. The carrying values of financial instruments such as accounts receivable, accounts payable, accrued liabilities, borrowings under the revolving credit facility and subsidiary lines of credit approximate fair value based upon either short maturities or variable interest rates of these instruments. |
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Liability for Contingent Consideration | Liability for Contingent Consideration In addition to the initial cash consideration paid to former shareholders of Network1 and Intelisys, the Company is obligated to make additional earnout payments based on future results through a specified date based on a multiple of the subsidiary’s pro forma earnings as defined in the respective purchase agreements. Future payments are to be paid in the functional currency of the acquired entity, which is the Brazilian real for Network1 and U.S. dollars for Intelisys. The Company paid the final earnout payment to the former shareholders of CDC during fiscal year 2016 and the final earnout payment to Imago during fiscal year 2017. The Company also made a single earnout payment to the former shareholders of POS Portal during fiscal year 2018 in accordance with the share purchase agreement. Network1 has one remaining earnout payment to be paid during fiscal year 2019. Intelisys has three remaining earnout payments to be paid in annual installments during fiscal years 2019 through 2021. In accordance with ASC Topic 805, the Company determines the fair value of this liability for contingent consideration at each reporting date throughout the term of the earnout using a form of a probability weighted discounted cash flow model. Each period the Company will reflect the contingent consideration liability at fair value with changes recorded in the change in fair value of contingent consideration line item on the Consolidated Income Statement. Current and noncurrent portions of the liability are presented in the current portion of contingent consideration and long-term portion of contingent consideration line items on the Consolidated Balance Sheets. |
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Contingencies | Contingencies The Company accrues for contingent obligations, including estimated legal costs, when it is probable that a liability is incurred and the amount is reasonably estimable. As facts concerning contingencies become known, management reassesses its position and makes appropriate adjustments to the financial statements. Estimates that are particularly sensitive to future changes include tax, legal and other regulatory matters, which are subject to change as events evolve and as additional information becomes available during the administrative and litigation process. |
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Revenue Recognition | Revenue Recognition Revenue is recognized once four criteria are met: (1) the Company must have persuasive evidence that an arrangement exists; (2) delivery must occur (this includes the transfer of both title and risk of loss, provided that no significant obligations remain); (3) the price must be fixed and determinable; and (4) collectability must be reasonably assured. The Company allows its customers to return product for exchange or credit, subject to certain limitations. Taxes collected from customers and remitted to governmental authorities, such as sales taxes and value added taxes, are excluded from net sales. The Company provides third-party service contracts, typically for product maintenance and support. These service contracts are sold separately from the products, and the Company often serves as the agent for the contract on behalf of the original equipment manufacturer. Since the Company acts as an agent on behalf of most of these service contracts sold, revenue is recognized net of cost at the time of sale. However, the Company provides some self-branded warranty programs and engages a third party (generally the original equipment manufacturer) to cover the fulfillment of any obligations arising from these contracts. These revenues and associated third-party costs are amortized over the life of the contract and presented in net sales and cost of goods sold, respectively. Service revenue associated with third-party service contracts and warranty programs, as mentioned above, along with configuration and marketing services, is recognized when the work is complete and the four criteria discussed above have been met. Service revenue associated with service contracts, warranty programs, configuration, marketing and other services approximates 3% of consolidated net sales for fiscal years 2018, 2017 and 2016. The Company provides hardware and value added services for point of sale and payment equipment. This includes terminals, related accessories, financing, device configuration as well as software licenses, professional services and hardware support programs. The Company is the primary obligor for all hardware, software and services sold and recognizes such revenue and cost of goods sold on a gross basis. The revenue associated with rental offerings to customers is recognized in net sales and the cost associated with such offering is recognized as depreciation on the capitalized equipment in cost of goods sold in the Consolidated Income Statements. Through the Intelisys acquisition, the Company has a recurring revenue model in which the Company acts as a master agent partnering suppliers with sales agents to provide telecommunications and cloud services to end-users. As the Company acts as an agent on behalf of the suppliers' services, commission revenue received from the supplier is recognized net of cost associated with the commissions the Company pays to sales agents, at the time of sale. |
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Shipping Revenue and Costs | Shipping Revenue and Costs Shipping revenue is included in net sales, and related costs are included in cost of goods sold. |
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Advertising Costs | Advertising Costs The Company defers advertising-related costs until the advertising is first run in trade or other publications or, in the case of brochures, until the brochures are printed and available for distribution or posted online. Advertising costs, net of supplier reimbursement are included in selling, general and administrative expenses, were not significant in any of the three fiscal years ended June 30, 2018, 2017 and 2016. |
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Foreign Currency | Foreign Currency The currency effects of translating the financial statements of the Company’s foreign entities that operate in their local currency are included in the cumulative currency translation adjustment component of accumulated other comprehensive income or loss. The Company's functional currencies include U.S. dollars, Brazilian reais, euros, British pounds, Colombian pesos and Canadian dollars. The assets and liabilities of these foreign entities are translated into U.S. dollars using the exchange rate at the end of the respective period. Sales, costs and expenses are translated at average exchange rates effective during the respective period. Foreign currency transactional and re-measurement gains and losses are included in other expense (income) in the Consolidated Income Statements. Such amounts are not significant to any of the periods presented. |
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Income Taxes | Income Taxes Income taxes are accounted for under the asset and liability method. Deferred income taxes reflect tax consequences on future years of differences between the tax bases of assets and liabilities and their financial reporting amounts. In accordance with ASC 740, Accounting for Income Taxes valuation allowances are provided against deferred tax assets when it is more likely than not that an asset will not be realized. Additionally, the Company maintains reserves for uncertain tax provisions. On December 22, 2017, the U.S. government enacted the Tax Cuts and Jobs Act (the "Tax Act"). The Company has accounted for changes in the tax provision in accordance with the new law. In response to the Tax Act, the Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) that provides guidance on accounting for the impact of the Tax Act. SAB 118 allows companies to record provisional amounts to the extent reasonably estimable and adjust them over time as more information becomes available, not to extend beyond the measurement period of one year from the enactment of the Tax Act. Accordingly, the Company has recorded provisional amounts for the one-time transition tax on the deemed repatriation of undistributed foreign earnings and the remeasurment of deferred tax assets and liabilities. The final impact from the enactment of the Tax Act may differ from the estimates provided for a number of reasons including, but not limited to, the issuance of final regulations, interpretation of the law and refinement of the Company's ongoing analysis of the new tax positions. Any changes in the provisional amount recognized will be reflected in the income tax expense in the period they are identified. |
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Share-Based Payments | Share-Based Payments The Company accounts for share-based compensation using the provisions of ASC 718, Accounting for Stock Compensation, which requires the recognition of the fair value of share-based compensation. Furthermore, the Company adopted ASU 2016-09 which simplified several aspects of the accounting share-based compensation, including income tax effects, forfeitures, statutory withholding requirements and cash flow statement classifications. Share-based compensation is estimated at the grant date based on the fair value of the awards. Since this compensation cost is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures. ASU 2016-09 allows companies to elect an accounting policy either to continue to estimate the total number of awards for which the requisite service period will not be rendered or to account for forfeitures when they occur. The Company has elected to maintain its current accounting policy, estimate the total number of awards expected to be forfeited at the time of grant and revise such estimates, if necessary, in subsequent periods if actual forfeitures differ. The Company has elected to expense grants of awards with graded vesting on a straight-line basis over the requisite service period for each separately vesting portion of the award. |
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Common Stock Repurchases | Common stock repurchases Repurchases of common stock are accounted for at cost, which includes brokerage fees, and are included as a component of shareholder's equity on the Consolidated Balance Sheets. |
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Comprehensive Income | Comprehensive Income ASC 220, Comprehensive Income, defines comprehensive income as the change in equity (net assets) of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. The components of comprehensive income for the Company include net income, unrealized gains or losses on hedged transactions, net of tax and foreign currency translation adjustments arising from the consolidation of the Company’s foreign subsidiaries. |
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Business Combinations | Business Combinations The Company accounts for business combinations in accordance with ASC 805, Business Combinations. ASC 805 establishes principles and requirements for recognizing the total consideration transferred to and the assets acquired, liabilities assumed and any non-controlling interest in the acquired target in a business combination. ASC 805 also provides guidance for recognizing and measuring goodwill acquired in a business combination and requires the acquirer to disclose information that users may need to evaluate and understand the financial impact of the business combination. |
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Reclassifications | Reclassifications Certain reclassifications have been made on the Consolidated Statements of Cash Flows to show taxes paid on settlement of equity awards separately from exercise of stock options under cash flows from financing activities. Prior year balances have been reclassified to conform with current year presentation. These reclassifications had no effect on consolidated financial results. |
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Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the FASB issued a comprehensive new revenue recognition standard for contracts with customers that will supersede most current revenue recognition guidance, including industry-specific guidance. The core principle of this standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, the standard provides a five-step analysis of transactions to determine when and how revenue is recognized. Other major provisions include the capitalization and amortization of certain contract costs, ensuring the time value of money is considered in the transaction price and allowing estimates of variable consideration to be recognized before contingencies are resolved in certain circumstances. This guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The new standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. The standard permits the use of either the retrospective or cumulative effect transition method. The Company adopted this guidance for the fiscal year beginning July 1, 2018 using the full retrospective transition method. The Company engaged a third-party consultant to assist with developing a multi-phase plan to assess the impact of adoption. The Company does not expect the adoption of ASC 606 to have a material impact to the financial statements and is currently in the process of finalizing policy and procedure documentation around the adoption of the standard. Additionally, the Company is in the process of evaluating the impact of the expanded disclosure requirements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) requiring lessees to reflect most leases on their balance sheets and recognize expenses on their income statements in a manner similar to current guidance. Under the new guidance, lessees will be required to recognize a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted basis, and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The asset will be measured at the lease liability amount, adjusted for lease prepayments, lease incentives received and the lessee's initial direct costs. For leases with a lease term of 12 months or less, as long as the lease does not include options to purchase the underlying assets, lessees can elect not to recognize a lease liability and right-of-use asset. Under the new guidance, lessor accounting is largely unchanged, and the accounting for sale and leaseback transactions is simplified. The standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. This guidance will be applicable to the Company for the fiscal year beginning July 1, 2019. The guidance can be adopted using a modified retrospective approach or a cumulative-effect adjustment to the opening balance sheet of retained earnings in the period of adoption for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. The Company is currently evaluating the impact on its consolidated financial statements upon the adoption of this new guidance. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) intended to reduce diversity in practice of how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The update addresses eight specific cash flow issues, with the treatment of contingent consideration payments made after a business combination being the most directly applicable to the Company. The update requires that cash payments made approximately three months or less after an acquisition's consummation date should be classified as cash outflows for investing activities. Payment made thereafter up to the amount of the original contingent consideration liability should be classified as cash outflows from financing activities. Payments made in excess of the amount of the original contingent consideration liability should be classified as cash outflows from operating activities. The standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years and early adoption is permitted. The standard will be applicable to the Company for the fiscal year beginning July 1, 2018. The guidance requires adoption using a retrospective transition method. Upon adoption, the Company expects to retroactively reclassify cash outflows between financing activities and operating activities related to contingent consideration payments in excess of the originally valued contingent consideration liability at the date of acquisition. In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815) that amends and simplifies guidance related to hedge accounting to more accurately portray the economics of an entity’s risk management activities in its financial statements. The standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted in any interim or annual period. This guidance will be applicable to the Company for the fiscal year beginning July 1, 2019. The guidance requires adoption using a modified retrospective approach. The presentation and disclosure requirements apply prospectively. The Company is currently evaluating the impact on its consolidated financial statements upon the adoption of this new guidance. The Company has reviewed other newly issued accounting pronouncements and concluded that they are either not applicable to its business or that no material effect is expected on its consolidated financial statements as a result of future adoption. |
Earnings per Share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings per Share |
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Property and Equipment (Tables) |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Property and Equipment | Property and equipment is comprised of the following:
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Accrued Expenses and Other Current Liabilities (Tables) |
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Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accrued Expenses and Current Liabilities | Accrued expenses and other current liabilities is comprised of the following:
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Acquisitions (Tables) |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Purchase Price Allocation |
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Goodwill and Other Identifiable Intangible Assets (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Changes in Goodwill | Changes in the carrying amount of goodwill for the years ended June 30, 2018 and 2017, by reportable segment, are set forth in the table below. Additions to goodwill for fiscal years 2018 and 2017 are due to the acquisitions of POS Portal and Intelisys, respectively.
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Schedule of Identifiable Intangible Assets | The following table shows the Company’s identifiable intangible assets as of June 30, 2018 and 2017, respectively.
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Schedule of Estimated Future Amortization Expense | Estimated future amortization expense is as follows:
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Short-Term Borrowings and Long-Term Debt (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long-term Debt | The following table shows the Company’s long term debt as of June 30, 2018 and 2017, respectively.
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Schedule of Maturities of Revolving Credit Facility and Long-term Debt | Scheduled maturities of the Company’s revolving credit facility and long-term debt at June 30, 2018 are as follows:
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Derivatives and Hedging Activities (Tables) |
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General Discussion of Derivative Instruments and Hedging Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Contracts and Changes in Underlying Value of the Foreign Currency Exposures | Summarized financial information related to these derivative contracts and changes in the underlying value of the foreign currency exposures are as follows:
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Cash Flow Hedges Included in Accumulated Other Comprehensive Income (Loss) | The components of the cash flow hedge included in accumulated other comprehensive income (loss), net of income taxes, in the Consolidated Statements of Shareholders’ Equity, are as follows:
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Derivative Instruments | The Company has the following derivative instruments located on the Consolidated Balance Sheets and Income Statements as of June 30, 2018, utilized for the risk management purposes detailed above:
The Company has the following derivative instruments located on the Consolidated Balance Sheets and Income Statements as of June 30, 2017, utilized for the risk management purposes detailed above:
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Fair Value of Financial Instruments (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Short-term Investments and Financial Instruments | The following table summarizes the valuation of the Company's remaining assets and liabilities measured at fair value on a recurring basis as of June 30, 2018:
The following table presents assets and liabilities measured at fair value on a recurring basis as of June 30, 2017:
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Fair Value, Business Acquisition, Liability for Contingent Consideration | The table below provides a summary of the changes in fair value of the Company’s contingent considerations for the Network1, Intelisys and POS Portal earnouts, which is measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the fiscal year ended June 30, 2018. The contingent consideration due to the former shareholders of POS Portal was paid in full during the quarter ended December 31, 2017.
(1) The contingent consideration payable to the former shareholders of Network1 has been reduced by payments the Company made to settle pre-acquisition contingencies during the quarter ended June 30, 2018. The table below provides a summary of the changes in fair value of the Company’s contingent considerations for the Imago, Network1 and Intelisys earnouts, which is measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the fiscal year ended June 30, 2017:
Scheduled maturities of the Company’s contingent considerations at June 30, 2018 are as follows:
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Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation | Valuation techniques and significant observable inputs used in recurring Level 3 fair value measurements for our contingent consideration liabilities as of June 30, 2018 and 2017 were as follows.
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Share-Based Compensation (Tables) |
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Jun. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Compensation [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Share-based Compensation Arrangements by Share-based Payment Award | Total share-based compensation included as a component of selling, general and administrative expenses in our Consolidated Income Statements was as follows:
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Weighted Average Assumptions for the Options Granted During the Following Fiscal Years | The Company used the following weighted-average assumptions for the options granted during the following fiscal years:
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Stock Option Plans | A summary of activity under our stock option plans is presented below:
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Unvested Shares | A summary of the status of the Company’s shares subject to unvested options is presented below:
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Stock Options Outstanding | The following table summarizes information about stock options outstanding and exercisable as of June 30, 2018:
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Restricted Stock Outstanding | During the fiscal year ended June 30, 2018, the Company granted 138,665 shares of restricted stock to employees and non-employee directors, all of which were issued in the form of RSUs or PUs:
(1) The RSU's granted on February 1, 2018 contains both service and performance-based vesting conditions for the period January 1, 2018 through December 31, 2020 (the "performance cycle") as determined by the Compensation Committee of the Company's Board of Directors. The total number for target shares granted could differ from the actual shares vested at the conclusion of the performance cycle. See the Company's 2018 Proxy Statement for more information about these grants. (2) Under the 2013 Long-Term Incentive Plan, non-employee directors receive annual awards of restricted stock, as opposed to stock options. The number of shares of restricted stock to be granted is established from time to time by the Board of Directors. Currently, the number of shares of restricted stock awarded annually to each non-employee director generally is determined by dividing $100,000 by the equity award value of the common stock on the date of grant, as defined in the 2013 Long-Term Incentive Plan. The equity award value means the value per share based on a 45-day averaging of the fair market value of the common stock over a specified period of time, or the fair market value of the common stock on a specified date. These awards will generally vest in full on the day that is six months after the date of grant or upon the earlier occurrence of (i) the director’s termination of service as a director by reason of death, disability or retirement or (ii) a change in control by the Company. The compensation expense associated with these awards will be recognized on a pro-rata basis over this period. A summary of the status of the Company’s outstanding restricted stock is presented below:
(1) These target shares granted as RSUs during fiscal year 2015 have service based and performance based vesting conditions. The actual number of shares granted for each of the three tranches, for the period June 1, 2014 through June 30, 2017, is determined after the date of the Company's financial statements. Therefore, the adjustment recognized during fiscal year 2018 represents the variance between the shares assumed to be granted versus at June 30, 2017 the actual shares granted for the third tranche. |
Employee Benefit Plans (Tables) |
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Defined Benefit Plans and Other Postretirement Benefit Plans Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Employer Contributions |
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Income Taxes (Tables) |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Expense (Benefit) | Income tax expense (benefit) consists of:
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Reconciliation of U.S.Federal Income Tax Expense | A reconciliation of the U.S. Federal income tax expense at a blended statutory rate of 28% for the fiscal year ended June 30, 2018 and a statutory rate of 35% for the June 30, 2017 and 2016 fiscal years to actual income tax expense is as follows:
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Deferred Tax Assets and Liabilities | The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are presented below:
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Components of Pretax Earnings | The components of pretax earnings are as follows:
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Reconciliation of Unrecognized Tax Benefits | A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
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Commitments and Contingencies (Tables) |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lease Expense | Lease expense and future minimum lease payments under operating leases and capital leases are as follows:
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Future Minimum Lease Payments |
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Schedule of Capital Leased Assets | The components of the Company's capital lease as of June 30, 2018 are as follows:
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Schedule of Pre-acquisition Contingencies and Corresponding Indemnifications Receivables | The table below summarizes the balances and line item presentation of Network1's pre-acquisition contingencies and corresponding indemnification receivables in the Company's consolidated balance sheet:
The table below summarizes the balances and line item presentation of CDC's pre-acquisition contingencies and corresponding indemnification receivables in the Company's consolidated balance sheet:
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Segment Information (Tables) |
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Segment Reporting, Measurement Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Information by Segment | Selected financial information for each business segment is presented below:
(1) For the years ended June 30, 2018, 2017 and 2016, the amounts shown above include acquisition costs. (2) For the years ended June 30, 2018, 2017 and 2016, there were no sales in excess of 10% of consolidated net sales to any single international country.
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Accumulated Other Comprehensive (Loss) Income (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components Of Accumulated Other Comprehensive Income, Net Of Tax | The components of accumulated other comprehensive (loss) income, net of tax, are as follows:
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Schedule of Other Comprehensive Income (Loss), Tax | The tax effect of amounts in comprehensive income (loss) reflect a tax expense or benefit as follows:
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Earnings per Share (Details) - USD ($) $ / shares in Units, $ in Thousands |
12 Months Ended | ||
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Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2016 |
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Numerator: | |||
Net income | $ 33,153 | $ 69,246 | $ 63,619 |
Denominator: | |||
Weighted-average shares, basic (in shares) | 25,522,000 | 25,318,000 | 26,472,000 |
Dilutive effect of share-based payments (in shares) | 102,000 | 197,000 | 215,000 |
Weighted-average shares, diluted (in shares) | 25,624,000 | 25,515,000 | 26,687,000 |
Net income per common share, basic (in dollars per share) | $ 1.30 | $ 2.74 | $ 2.40 |
Net income per common share, diluted (in dollars per share) | $ 1.29 | $ 2.71 | $ 2.38 |
Weighted average shares excluded from the computation of diluted earnings per share (in shares) | 551,320 | 418,325 | 461,090 |
Property and Equipment (Narrative) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
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Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2016 |
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Property, Plant and Equipment [Abstract] | |||
Depreciation expense | $ 13,311 | $ 9,444 | $ 7,326 |
Deprecation expense recorded as cost of goods sold | $ 3,500 |
Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Jun. 30, 2017 |
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Payables and Accruals [Abstract] | ||
Deferred warranty revenue | $ 21,065 | $ 24,813 |
Accrued compensation | 22,378 | 21,713 |
Other taxes payable | 18,560 | 18,440 |
Accrued marketing expense | 4,457 | 5,914 |
Brazilian pre-acquisition contingencies | 1,385 | 3,506 |
Accrued freight | 3,849 | 3,392 |
Other accrued liabilities | 19,179 | 26,937 |
Accrued expensed and other current liabilities | $ 90,873 | $ 104,715 |
Goodwill and Other Identifiable Intangible Assets (Changes in the Carrying Amount of Goodwill) (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
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Goodwill [Roll Forward] | ||
Goodwill, beginning balance | $ 200,881 | $ 92,715 |
Additions | 101,198 | 109,005 |
Unrealized loss on foreign currency translation | (3,905) | (839) |
Goodwill, ending balance | 298,174 | 200,881 |
Worldwide Barcode, Networking and Security Segment [Member] | ||
Goodwill [Roll Forward] | ||
Goodwill, beginning balance | 36,260 | 36,434 |
Additions | 101,198 | 0 |
Unrealized loss on foreign currency translation | (244) | (174) |
Goodwill, ending balance | 137,214 | 36,260 |
Worldwide Communications and Services Segment [Member] | ||
Goodwill [Roll Forward] | ||
Goodwill, beginning balance | 164,621 | 56,281 |
Additions | 0 | 109,005 |
Unrealized loss on foreign currency translation | (3,661) | (665) |
Goodwill, ending balance | $ 160,960 | $ 164,621 |
Goodwill and Other Identifiable Intangible Assets (Narrative) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
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Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2016 |
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Finite-Lived Intangible Assets [Line Items] | |||
Weighted average amortization period | 10 years | 10 years | 10 years |
Additional amortization expense of intangible assets | $ 20,657 | $ 15,524 | $ 9,828 |
Goodwill and Other Identifiable Intangible Assets (Estimated Future Amortization Expense) (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Jun. 30, 2017 |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||
2019 | $ 18,920 | |
2020 | 18,308 | |
2021 | 18,200 | |
2022 | 16,564 | |
2023 | 15,591 | |
Thereafter | 49,223 | |
Total | $ 136,806 | $ 101,513 |
Short-Term Borrowings and Long-Term Debt (Long-term Debt) (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Jun. 30, 2017 |
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Debt Instrument [Line Items] | ||
Current portion of long-term debt | $ 551 | $ 0 |
Long term debt, net of current portion | 4,878 | 5,429 |
Borrowings under revolving credit facility | 244,000 | 91,871 |
Total debt | 249,429 | 97,300 |
Industrial Development Revenue Bond [Member] | ||
Debt Instrument [Line Items] | ||
Current portion of long-term debt | 551 | 0 |
Long term debt, net of current portion | 4,878 | 5,429 |
Multi-Currency Revolving Credit Facility [Member] | ||
Debt Instrument [Line Items] | ||
Borrowings under revolving credit facility | $ 244,000 | $ 91,871 |
Short-Term Borrowings and Long-Term Debt (Maturities of Revolving Credit Facility and Long-term Debt) (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Jun. 30, 2017 |
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Debt Instrument [Line Items] | ||
Total principal payments, revolving credit facility | $ 244,000 | $ 91,871 |
Industrial Development Revenue Bond [Member] | ||
Debt Instrument [Line Items] | ||
2019 | 551 | |
2020 | 338 | |
2021 | 342 | |
2022 | 347 | |
2023 | 351 | |
Thereafter | 3,500 | |
Total principal payments, long-term debt | 5,429 | |
Multi-Currency Revolving Credit Facility [Member] | ||
Debt Instrument [Line Items] | ||
2019 | 0 | |
2020 | 0 | |
2021 | 0 | |
2022 | 244,000 | |
2023 | 0 | |
Thereafter | 0 | |
Total principal payments, revolving credit facility | $ 244,000 | $ 91,871 |
Derivatives and Hedging Activities (Foreign Currency Derivatives Narrative) (Details) - USD ($) $ in Millions |
Jun. 30, 2018 |
Jun. 30, 2017 |
---|---|---|
Foreign Exchange Contract [Member] | ||
Derivative [Line Items] | ||
Notional amount of foreign currency contracts outstanding | $ 74.6 | $ 67.1 |
Derivatives and Hedging Activities (Derivative Contracts and Changes in Underlying Value of the Foreign Currency Exposures) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
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Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2016 |
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General Discussion of Derivative Instruments and Hedging Activities [Abstract] | |||
Net foreign exchange derivative contract loss (gain) | $ 386 | $ 146 | $ (1,951) |
Net foreign currency transactional and re-measurement loss | 1,710 | 1,773 | 4,522 |
Net foreign currency loss | $ 2,096 | $ 1,919 | $ 2,571 |
Derivatives and Hedging Activities (Interest Rates Narrative) (Details) - Interest Rate Swap [Member] - USD ($) |
12 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
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Derivative [Line Items] | ||
Notional amount of interest rate swap agreements outstanding | $ 50,000,000 | |
Ineffective portion of cash flow hedge | $ 0 | $ 0 |
Derivatives and Hedging Activities (Cash Flow Hedge Included in Accumulated Other Comprehensive Income (Loss)) (Details) - Interest Rate Swap [Member] - USD ($) $ in Thousands |
12 Months Ended | |
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Jun. 30, 2018 |
Jun. 30, 2017 |
|
Derivative Instruments, Gain (Loss) [Line Items] | ||
Net interest expense recognized as a result of interest rate swap | $ 161 | $ 7 |
Unrealized gain in fair value of interest swap rates | 1,422 | 14 |
Net increase in accumulated other comprehensive income (loss) | 1,583 | 21 |
Income tax effect | 494 | 8 |
Net increase in accumulated other comprehensive income (loss), net of tax | $ 1,089 | $ 13 |
Fair Value of Financial Instruments (Valuation Techniques and Significant Observable Inputs) (Details) |
Jun. 30, 2018 |
Jun. 30, 2017 |
---|---|---|
Weighted average cost of capital [Member] | ||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
Contingent consideration, liability, measurement input | 0.086 | 0.142 |
Adjusted EBITDA growth rate [Member] | ||
Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
Contingent consideration, liability, measurement input | 0.182 | 0.170 |
Fair Value of Financial Instruments Fair Value of Financial Instruments (Schedule of Maturities of Contingent Consideration) (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Jun. 30, 2017 |
---|---|---|
Fair Value Disclosures [Abstract] | ||
2019 | $ 42,975 | |
2020 | 32,239 | |
2021 | 33,019 | |
Total contingent consideration payments | $ 108,233 | $ 114,036 |
Share-Based Compensation (Schedule of Share-Based Compensation) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Share-based Compensation [Abstract] | |||
Equity classified stock options | $ 1,184 | $ 1,356 | $ 1,479 |
Equity classified restricted stock | 5,275 | 5,246 | 5,614 |
Total share-based compensation | $ 6,459 | $ 6,602 | $ 7,093 |
Share-Based Compensation (Weighted Average Assumptions for Options Granted) (Details) - $ / shares |
12 Months Ended | ||
---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Share-based Compensation [Abstract] | |||
Expected term (years) | 5 years | 5 years | 4 years 8 days |
Expected volatility | 30.70% | 30.88% | 28.70% |
Risk-free interest rate | 2.17% | 1.84% | 1.47% |
Dividend yield | 0.00% | 0.00% | 0.00% |
Weighted-average fair value per option (in dollars per share) | $ 10.60 | $ 11.26 | $ 9.53 |
Employee Benefit Plans (Employer Contributions) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Defined Benefit Plans and Other Postretirement Benefit Plans Disclosures [Abstract] | |||
Matching contributions | $ 1,163 | $ 875 | $ 735 |
Discretionary contributions | 4,700 | 3,413 | 3,617 |
Total contributions | $ 5,863 | $ 4,288 | $ 4,352 |
Income Taxes (Income Tax Expense (Benefit)) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Current: | |||
Federal | $ 38,263 | $ 31,149 | $ 21,855 |
State | 3,503 | 2,615 | 1,652 |
Foreign | 9,203 | 269 | 6,100 |
Total current | 50,969 | 34,033 | 29,607 |
Deferred: | |||
Federal | (9,987) | (3,832) | 3,990 |
State | (1,962) | (397) | 365 |
Foreign | (11,248) | 2,445 | (1,571) |
Total deferred | (23,197) | (1,784) | 2,784 |
Provision for income taxes | $ 27,772 | $ 32,249 | $ 32,391 |
Income Taxes (Components of Pretax Earnings) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Income Tax Disclosure [Abstract] | |||
Domestic | $ 66,416 | $ 79,871 | $ 76,062 |
Foreign | (5,491) | 21,624 | 19,948 |
Income before income taxes | $ 60,925 | $ 101,495 | $ 96,010 |
Income Taxes (Reconciliation of Unrecognized Tax Benefits) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward] | |||
Beginning Balance | $ 2,176 | $ 2,148 | $ 1,301 |
Additions based on tax positions related to the current year | 157 | 174 | 326 |
Additions for tax positions of prior years | 0 | 0 | 658 |
Reduction for tax positions of prior years | (280) | (146) | (137) |
Ending Balance | $ 2,053 | $ 2,176 | $ 2,148 |
Commitments and Contingencies (Lease Expense) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
Commitments and Contingencies Disclosure [Abstract] | |||
Lease expense | $ 9,824 | $ 8,703 | $ 7,394 |
Commitments and Contingencies (Future Minimum Lease Payments) (Details) $ in Thousands |
Jun. 30, 2018
USD ($)
|
---|---|
Operating Lease Payments | |
2019 | $ 8,196 |
2020 | 6,160 |
2021 | 5,316 |
2022 | 4,185 |
2023 | 3,404 |
Thereafter | 10,817 |
Total future minimum lease payments | 38,078 |
Capital Lease Payments | |
2019 | 675 |
2020 | 675 |
2021 | 0 |
2022 | 0 |
2023 | 0 |
Thereafter | 0 |
Total future minimum lease payments | 1,350 |
Less: amounts representing interest on capital lease | 30 |
Total future minimum principal lease payments | 1,320 |
Total Payments | |
2019 | 8,871 |
2020 | 6,835 |
2021 | 5,316 |
2022 | 4,185 |
2023 | 3,404 |
Thereafter | 10,817 |
Total future minimum lease payments | 39,428 |
Total future minimum principal lease payments | $ 39,398 |
Commitments and Contingencies (Capital Lease Components) (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 07, 2017 |
---|---|---|
Commitments and Contingencies Disclosure [Abstract] | ||
Property & Equipment | $ 1,583 | $ 1,900 |
Accumulated Depreciation | (259) | |
Net Book Value | 1,324 | |
Capital Lease Obligations, Short-Term | 653 | |
Capital Lease Obligations, Long-Term | 667 | |
Capital Lease Obligations, Total | $ 1,320 |
Commitments and Contingencies (Pre-Acquisition Contingencies and Receivables) (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Jun. 30, 2017 |
---|---|---|
CDC Brasil S A [Member] | ||
Assets | ||
Prepaid expenses and other assets (current) | $ 0 | $ 2,212 |
Other assets (noncurrent) | 0 | 0 |
Liabilities | ||
Other current liabilities | 0 | 2,212 |
Other long-term liabilities | 0 | 0 |
Network1 [Member] | ||
Assets | ||
Prepaid expenses and other assets (current) | 1,385 | 1,294 |
Other assets (noncurrent) | 5,700 | 8,235 |
Liabilities | ||
Other current liabilities | 1,385 | 1,294 |
Other long-term liabilities | $ 5,700 | $ 8,235 |
Segment Information (Narrative) (Details) |
12 Months Ended |
---|---|
Jun. 30, 2018
segment
| |
Segment Reporting, Measurement Disclosures [Abstract] | |
Number of technology business segments | 2 |
Accumulated Other Comprehensive Income (Loss) (Components Of Accumulated Other Comprehensive Income, Net Of Tax) (Details) - USD ($) $ in Thousands |
12 Months Ended | |||
---|---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Accumulated other comprehensive loss | $ 866,376 | $ 837,145 | $ 774,496 | $ 808,985 |
Tax expense (benefit) | 1,993 | (396) | 327 | |
Currency translation adjustment [Member] | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Accumulated other comprehensive loss | (85,279) | (73,217) | (72,687) | |
Unrealized gain on fair value of interest rate swap, net of tax [Member] | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Accumulated other comprehensive loss | 1,102 | 13 | 0 | |
Accumulated other comprehensive loss [Member] | ||||
Accumulated Other Comprehensive Income (Loss) [Line Items] | ||||
Accumulated other comprehensive loss | $ (84,177) | $ (73,204) | $ (72,687) | $ (64,502) |
Valuation And Qualifying Accounts (Schedule Of Valuation and Qualifying Accounts) (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2016 |
|
POS Portal [Member] | |||
SEC Schedule, 12-09, Movement in Valuation Allowances and Reserves [Roll Forward] | |||
Reserves of businesses acquired | $ 100 | ||
Intelisys [Member] | |||
SEC Schedule, 12-09, Movement in Valuation Allowances and Reserves [Roll Forward] | |||
Reserves of businesses acquired | $ 300 | ||
Recoveries | 600 | ||
KBZ [Member] | |||
SEC Schedule, 12-09, Movement in Valuation Allowances and Reserves [Roll Forward] | |||
Reserves of businesses acquired | $ 1,200 | ||
Recoveries | 1,500 | ||
SEC Schedule, 12-09, Allowance, Credit Loss [Member] | |||
SEC Schedule, 12-09, Movement in Valuation Allowances and Reserves [Roll Forward] | |||
Balance at Beginning of Period | 44,434 | 39,032 | 32,589 |
Amounts Charged to Expense | 7,075 | 8,901 | 7,571 |
Reductions | (5,610) | (3,860) | (3,829) |
Other | (338) | 361 | 2,701 |
Balance at End of Period | $ 45,561 | $ 44,434 | $ 39,032 |
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