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Goodwill and Acquired Intangible Assets

12 Months Ended

Jun. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Acquired Intangible Assets

Goodwill and Acquired Intangible Assets

Goodwill

The carrying amount of goodwill by reportable segment as of June 30, 2018 and June 30, 2017 is as follows:

	Vistaprint				Upload and Print				National Pen				All Other Businesses				Total
Balance as of June 30, 2016	$	121,752			$	319,373			$	—			$	24,880			$	466,005
Acquisitions (1)	—				—				57,720				—				57,720
Impairments (2)	—				(6,345		)		—				—				(6,345		)
Adjustments (3)(4)	23,200				(228		)		(23,200		)		(13,540		)		(13,768		)
Effect of currency translation adjustments (5)	2,255				9,005				—				91				11,351
Balance as of June 30, 2017	147,207				321,805				34,520				11,431				514,963
Adjustments	(58		)		—				(86		)		—				(144		)
Effect of currency translation adjustments (5)	(942		)		6,966				—				—				6,024
Balance as of June 30, 2018	$	146,207			$	328,771			$	34,434			$	11,431			$	520,843

_________________

(1) Refer to Note 7 for additional details related to our acquisitions.

(2) In fiscal 2017 we recorded an impairment charge of $6,345 related to our Tradeprint reporting unit. See below for additional details.

(3) We allocated $23,200 of goodwill to the Vistaprint segment for certain synergies that are expected to be realized by the Vistaprint segment as a result of the National Pen acquisition. Refer to Note 7 for additional details.

(4) Our Albumprinter business, part of our All Other Businesses reportable segment, was reclassified as held for sale on the consolidated balance sheet at June 30, 2017. The Albumprinter business was sold during the first quarter of fiscal 2018. Refer to Note 7 for additional details.

(5) Related to goodwill held by subsidiaries whose functional currency is not the U.S. Dollar.

Impairment Review

Fiscal 2018

For our annual goodwill impairment test as of May 31, 2018, we evaluated each of our ten reporting units with goodwill individually. We considered the timing of our most recent fair value assessment and associated headroom, the actual operating results as compared to the cash flow forecasts used in those fair value assessments, the current long-term forecasts for each reporting unit, and the general market and economic environment of each reporting unit. After performing this qualitative assessment for seven of our reporting units, we determined that there was no indication the carrying values of those reporting units exceeded their respective fair values.

Some of our reporting units are early-stage businesses that are subject to high degrees of risk and their business models continually evolve as they seek to establish foundations in large markets, resulting in greater volatility in their actual results and forecasted future results. We have a number of investments that fit this profile and we expect this type of volatility to prompt a quantitative analysis in our goodwill impairment testing from time to time. We performed a quantitative analysis for three such reporting units during this testing cycle in order to gain additional assurance there were no impairments. We estimated the fair value of each reporting unit, using the income approach, which was determined based on the present value of estimated future cash flows. The cash flow projections are based on our estimates of revenue growth rates and operating margins, taking into consideration recent business and market trends. The discount rates used were based on the weighted-average cost of capital adjusted for the related business-specific risks. For each of these reporting units, we compared the estimated fair value to the carrying value, and considered the estimated level of headroom. Based on the substantial level of headroom associated with each of these reporting units, we concluded there was no impairment. As a result of these qualitative and quantitative tests, there have been no identified impairments for the year ended June 30, 2018.

Fiscal 2017

During the third quarter fiscal 2017, we changed the composition of our Tradeprint reporting unit (a part of our Upload and Print reportable segment). This change, when combined with an updated profit outlook that was lower than originally forecasted as of the acquisition date, indicated that it was more likely than not that the fair value of the reporting unit was below the carrying amount.

    As required, prior to performing the quantitative goodwill impairment test, we first evaluated the recoverability of the Tradeprint long-lived assets as the change in expected long-term cash flows was indicative of a potential impairment. We performed the recoverability test using undiscounted cash flows for our Tradeprint asset group and concluded that an impairment of long-lived assets existed. We proceeded to estimate the fair value the assets, using an income and cost approach based on market participant assumptions and recognized a partial impairment charge for our acquired intangible assets of $3,211.

Subsequent to performing the long-lived asset impairment test, we performed our goodwill impairment test which resulted in an additional impairment charge of the total goodwill of the Tradeprint reporting unit of $6,345. In order to execute the quantitative goodwill impairment test, we compared the fair value of the Tradeprint reporting unit to its carrying value. We used the income approach, specifically the discounted cash flow method, to derive the fair value. This approach calculates fair value by estimating the after-tax cash flows attributable to a reporting unit and then discounting the after-tax cash flows to a present value using a risk-adjusted discount rate. We selected this method as being the most meaningful in preparing our goodwill assessment as we believed the income approach most appropriately measured our income producing assets. We considered using the market approach but concluded it was not appropriate in valuing this particular reporting unit given the lack of relevant market comparisons available for application of the market approach. The cash flow projections in the Tradeprint fair value analysis are based on management's estimates of revenue growth rates and operating margins, taking into consideration historical results, as well as industry and market conditions. The discount rate is based on a weighted average cost of capital (“WACC”), which represented the average rate a business must pay its providers of debt and equity, plus a risk premium. The WACC of 11.5% used to test the Tradeprint goodwill was derived from a group of comparable companies.

Acquired Intangible Assets

	June 30, 2018												June 30, 2017
	Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount				Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount
Trade name	$	99,102			$	(23,821	)		$	75,281			$	97,728			$	(14,839	)		$	82,889
Developed technology	55,460				(39,218		)		16,242				55,423				(28,943		)		26,480
Customer relationships	182,545				(70,655		)		111,890				179,715				(44,475		)		135,240
Customer network and other	16,289				(8,312		)		7,977				16,291				(6,185		)		10,106
Print network	25,716				(6,905		)		18,811				25,171				(3,962		)		21,209
Total intangible assets	$	379,112			$	(148,911	)		$	230,201			$	374,328			$	(98,404	)		$	275,924

Acquired intangible assets amortization expense for the years ended June 30, 2018, 2017 and 2016 was$49,881, $46,145 and $40,563. During the year ended June 30, 2018, the increase in acquired intangible asset amortization is primarily related to our fiscal 2017 acquisition of National Pen. Estimated intangible assets amortization expense for each of the five succeeding fiscal years is as follows:

2019		$	42,582
2020		37,967
2021		37,859
2022		36,297
2023		28,386
		$	183,091

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- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 350
-URI http://asc.fasb.org/topic&trid=2144416

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