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Summary of Significant Accounting Policies | 9 Months Ended
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Mar. 31, 2019
Accounting Policies [Abstract] |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and, accordingly, do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting primarily of normal recurring accruals, considered necessary for fair presentation of the results of operations for the interim periods reported and of our financial condition as of the date of the interim balance sheet have been included. The consolidated financial statements include the accounts of Cimpress N.V., its wholly owned subsidiaries, entities in which we maintain a controlling financial interest, and those entities in which we have a variable interest and are the primary beneficiary. Intercompany balances and transactions have been eliminated. Investments in entities in which we cannot exercise significant influence, and the related equity securities do not have a readily determinable fair value, are accounted for using the cost method and are included in other assets on the consolidated balance sheets. Operating results for the three and nine months ended March 31, 2019 are not necessarily indicative of the results that may be expected for the year ending June 30, 2019 or for any other period. The consolidated balance sheet at June 30, 2018 has been derived from our audited consolidated financial statements at that date but does not include all of the information and notes required by GAAP for complete financial statements. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended June 30, 2018 included in our Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (the “SEC”). Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We believe our most significant estimates are associated with the ongoing evaluation of the recoverability of our long-lived assets and goodwill, estimated useful lives of assets, share-based compensation, accounting for business combinations, and income taxes and related valuation allowances, among others. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results could differ from those estimates. Revenue Recognition Revenue Recognition - Adoption of ASC 606 On July 1, 2018, we adopted ASC 606, Revenue from Contracts with Customers, using the modified retrospective transition approach. Under the modified retrospective approach, we applied the new standard for any contracts that were not complete as of the adoption date and recognized any cumulative impacts as of the adoption date within retained earnings on our consolidated balance sheet. We did not adjust the prior comparable period. The following table summarizes the cumulative effect of adopting the new revenue standard as of the adoption date of July 1, 2018:
Consolidated Balance Sheet | As reported at June 30, 2018 |  | ASC 606 adjustments |  | Adjusted balance at July 1, 2018
Assets |  |  |  |  |  |  |  |
Prepaid expenses and other current assets | $ | 78,846 |  |  | $ | (3,738 | ) |  | $ | 75,108 |
Deferred tax assets | 67,087 |  |  | 595 |  |  | 67,682 |
Liabilities and Shareholders' Equity |  |  |  |  |  |  |  |
Deferred revenue | $ | 27,697 |  |  | $ | 103 |  |  | $ | 27,800 |
Retained earnings | 452,756 |  |  | (3,246 | ) |  | 449,510 |
The following table summarizes the impact as of and for the three and nine months ended March 31, 2019 from adopting the new revenue standard as compared to the previous revenue standard:
| As reported (current revenue standard) |  | Current period adjustments |  | As adjusted (previous revenue standard)
Consolidated Statement of Operations for the Three Months Ended March 31, 2019 |  |  |  |  |  |  |  |
Marketing and selling expense (1) | $ | 171,584 |  |  | $ | 1,486 |  |  | $ | 173,070 |
Income tax expense | 4,091 |  |  | (83 | ) |  | 4,008 |
Net income | 6,242 |  |  | (1,403 | ) |  | 4,839 |
Consolidated Statement of Operations for the Nine Months Ended March 31, 2019 |  |  |  |  |
Marketing and selling expense (1) | $ | 566,335 |  |  | $ | (486 | ) |  | $ | 565,849 |
Income tax expense | 23,971 |  |  | 86 |  |  | 24,057 |
Net income | 60,285 |  |  | 400 |  |  | 60,685 |
Consolidated Balance Sheet as of March 31, 2019 |  |  |  |  |
Assets |  |  |  |  |
Prepaid expenses and other current assets | $ | 92,048 |  |  | $ | 4,224 |  |  | $ | 96,272 |
Deferred tax assets | 57,885 |  |  | (121 | ) |  | 57,764 |
Liabilities and Shareholders' Equity |  |  |  |  |
Accrued expenses | $ | 207,918 |  |  | $ | 35 |  |  | $ | 207,953 |
Deferred revenue | 34,941 |  |  | (103 | ) |  | 34,838 |
Retained earnings | 503,275 |  |  | 4,171 |  |  | 507,446 |
_____________________ (1) During the three and nine months ended March 31, 2019, the adjustment to marketing and selling expense was the impact from National Pen's direct mail costs that resulted in lower expense of $1,486 and higher expense of $486, respectively. The timing of the expense recognition would have been different under the previous revenue standard since they would have been capitalized within prepaid expense and other current assets and amortized over the customer response period to marketing and selling expense. As of July 1, 2018, we recognized a cumulative effect adjustment within retained earnings of $3,738. The material impact of our adoption of ASC 606 is related to the timing for recognizing direct-response advertising costs, which were costs previously capitalized and expensed based on the guidance outlined in ASC 340 - "Other Assets and Deferred Assets". The guidance included in ASC 340 is eliminated by ASC 606, and under the new revenue standard these costs are expensed as incurred because they do not meet the requirements for capitalization since they are not direct and incremental to obtaining a contract. Historically the direct mail costs were capitalized and amortized over the customer response period (typically 3-4 months) and now costs are recognized when the direct mail is sent to the customers. This creates volatility in our quarterly profitability but should not have a significant impact on an annual basis and has no impact on cash flow. By applying the modified retrospective approach for implementing the standard, we adjusted the cumulative impact of capitalized costs of $3,738, resulting in a decrease to prepaid expenses and other current assets and a decrease to retained earnings, as well as the related tax impact of $595, resulting in an increase to deferred tax assets and an increase to retained earnings on July 1, 2018. We also identified an impact related to customer loyalty programs that are offered by several of our businesses. Under the new revenue standard, the rewards associated with these programs are recognized as an additional performance obligation, resulting in an allocation of the transaction price and deferral of revenue until the subsequent reward redemption. By applying the modified retrospective approach for implementing the standard, we adjusted the cumulative impact of $103, resulting in an increase to deferred revenue and a decrease to retained earnings on July 1, 2018. All other impacts during the current periods were not considered material. Revenue Recognition Policy We generate revenue primarily from the sale and shipment of customized manufactured products. To a much lesser extent (and only in our Vistaprint business) we provide digital services, website design and hosting, and email marketing services, as well as a small percentage from order referral fees and other third-party offerings. Revenues are recognized when control of the promised products or services is transferred to the customer in an amount that reflects the consideration we expect to be entitled to in exchange for those products or services. Shipping revenues are recognized when control of the related products is transferred to the customer. We recognize revenue upon shipment of the fulfilled orders, which generally occurs upon delivery to the shipping carrier, but certain revenue recognition occurs upon delivery to the customer. If multiple products are ordered together, each product is considered a separate performance obligation, and the transaction price is allocated to each performance obligation based on the standalone selling price. Revenue is recognized upon satisfaction of each performance obligation. We generally determine the standalone selling prices based on the prices charged to our customers. We record deferred revenue when cash payments are received in advance of our satisfaction of the related performance obligation. The satisfaction of performance obligations generally occur shortly after cash payment and we expect to recognize our deferred revenue balance as revenue within three months subsequent to March 31, 2019. We periodically provide marketing materials and promotional offers to new customers and existing customers that are intended to improve customer retention. These incentive offers are generally available to all customers and, therefore, do not represent a performance obligation as customers are not required to enter into a contractual commitment to receive the offer. These discounts are recognized as a reduction to the transaction price when used by the customer. Costs related to free products are included within cost of revenue and sample products are included within marketing and selling expense. We have elected to apply the practical expedient under ASC 340-40-25-4 to expense incremental direct costs as incurred, which primarily includes sales commissions, since our contract periods generally are less than one year and the related performance obligations are satisfied within a short period of time. Additional revenue disaggregation disclosure requirements resulting from the adoption of ASC 606 are included in Note 13. Share-based Compensation Total share-based compensation expense was $7,754 and $13,950 for the three and nine months ended March 31, 2019, respectively, and $13,492 and $33,718 for the three and nine months ended March 31, 2018, respectively. During the first quarter of fiscal 2018, we issued supplemental performance share units ("supplemental PSUs") to certain members of management (excluding Robert Keane, our Chairman and CEO) that were incremental to our typical long-term incentive award grants. The supplemental PSUs are subject to a three-year cumulative financial performance condition intended to provide a stretch goal for participants in addition to service vesting and share price performance conditions. The evaluation of achievement of the performance condition is at the discretion of the Compensation Committee and, therefore, the awards are subject to mark-to-market accounting throughout the performance vesting period. Beginning in the second quarter of fiscal 2018, we concluded that the achievement of the performance condition was probable and recognized $15,397 of expense cumulatively through the first quarter of fiscal 2019. In the second quarter of fiscal 2019, which is seasonally significant, we concluded that the achievement of the three-year cumulative performance condition was no longer probable, and we reversed the previously recognized expense of $15,397. As of March 31, 2019 we continued to consider achievement of the performance condition to not be probable. If, in a future period, we determine that it is probable that the financial performance condition will be achieved based on our financial performance, we will cumulatively catch up the expense in that period. Foreign Currency Translation Our non-U.S. dollar functional currency subsidiaries translate their assets and liabilities denominated in their functional currency to U.S. dollars at current rates of exchange in effect at the balance sheet date, and revenues and expenses are translated at average rates prevailing throughout the period. The resulting gains and losses from translation are included as a component of accumulated other comprehensive loss. Transaction gains and losses and remeasurement of assets and liabilities denominated in currencies other than an entity’s functional currency are included in other (expense) income, net in our consolidated statements of operations. Other (Expense) Income, Net The following table summarizes the components of other (expense) income, net:
| Three Months Ended March 31, |  | Nine Months Ended March 31,
| 2019 |  | 2018 |  | 2019 |  | 2018
Gains (losses) on derivatives not designated as hedging instruments (1) | $ | 1,258 |  |  | $ | (9,102 | ) |  | $ | 19,802 |  |  | $ | (19,103 | )
Currency-related (losses) gains, net (2) | (4,085 | ) |  | 7,519 |  |  | (3,011 | ) |  | (7,133 | )
Other gains | 332 |  |  | 25 |  |  | 595 |  |  | 634 |
Total other (expense) income, net | $ | (2,495 | ) |  | $ | (1,558 | ) |  | $ | 17,386 |  |  | $ | (25,602 | )
_____________________ (1) Primarily relates to both realized and unrealized gains (losses) on derivative currency forward and option contracts not designated as hedging instruments. (2) We have significant non-functional currency intercompany financing relationships that we may change at times and are subject to currency exchange rate volatility. The currency-related (losses) gains, net for the three and nine months ended March 31, 2019 and 2018 are primarily driven by this intercompany activity. In addition, we have certain cross-currency swaps designated as cash flow hedges, which hedge the remeasurement of certain intercompany loans, both presented in the same component above. Unrealized gains related to cross-currency swaps were $2,146 and $3,389 for the three and nine months ended March 31, 2019, respectively, as compared to unrealized losses of $3,582 and $9,708 for the three and nine months ended March 31, 2018, respectively. Net Income (Loss) Per Share Attributable to Cimpress N.V. Basic net income (loss) per share attributable to Cimpress N.V. is computed by dividing net income (loss) attributable to Cimpress N.V. by the weighted-average number of ordinary shares outstanding for the respective period. Diluted net income (loss) per share attributable to Cimpress N.V. gives effect to all potentially dilutive securities, including share options, restricted share units (“RSUs”), restricted share awards ("RSAs") and performance share units ("PSUs"), if the effect of the securities is dilutive using the treasury stock method. Awards with performance or market conditions are included using the treasury stock method only if the conditions would have been met as of the end of the reporting period and their effect is dilutive. The following table sets forth the reconciliation of the weighted-average number of ordinary shares:
| Three Months Ended March 31, |  | Nine Months Ended March 31,
| 2019 |  | 2018 |  | 2019 |  | 2018
Weighted average shares outstanding, basic | 30,763,055 |  |  | 30,724,018 |  |  | 30,837,207 |  |  | 30,992,066 |
Weighted average shares issuable upon exercise/vesting of outstanding share options/RSUs/RSAs | 751,738 |  |  | — |  |  | 943,934 |  |  | 1,284,454 |
Shares used in computing diluted net income (loss) per share attributable to Cimpress N.V. | 31,514,793 |  |  | 30,724,018 |  |  | 31,781,141 |  |  | 32,276,520 |
Weighted average anti-dilutive shares excluded from diluted net income (loss) per share attributable to Cimpress N.V. (1) | — |  |  | 1,448,530 |  |  | — |  |  | 3,054 |
_____________________ (1) In the periods in which a net loss is recognized, the impact of share options, RSUs, and RSAs is not included as they are anti-dilutive. Build-to-Suit Lease Arrangements For accounting purposes, we were deemed to be the owner of two projects during their respective construction periods: the Waltham, Massachusetts office building lease and a lease executed during the first quarter of fiscal 2019 for a production facility in Dallas, Texas. For both build-to-suit leases, property, plant and equipment, net, was $121,108 and $111,926 as of March 31, 2019 and June 30, 2018, respectively, related to the buildings. The financing lease obligation and deferred rent credit related to the buildings on our consolidated balance sheets was $124,526 and $115,312 as of March 31, 2019 and June 30, 2018, respectively. All additions during the current period were capitalized construction costs related to the Dallas facility. Recently Issued or Adopted Accounting Pronouncements New Accounting Standards Adopted In May 2017, the FASB issued Accounting Standards Update No. 2017-09, "Compensation - Stock Compensation (Topic 718)," (ASU 2017-09), which clarifies the application of Topic 718 when accounting for changes in the terms and conditions of a share-based payment award. Under the new standard, changes to the terms or conditions of a share-based payment award are to be accounted for under modification accounting unless there is no change to the fair value, vesting conditions and classification of the award after modification. We adopted the amendment on its effective date of July 1, 2018. The amendment is applied prospectively, and the new standard did not have a material impact on our consolidated financial statements. In November 2016, the FASB issued Accounting Standards Update No. 2016-18, "Statement of Cash Flows (Topic 230) Restricted Cash" (ASU 2016-18), which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. We adopted the new standard on July 1, 2018. The new standard did not have a material effect on our consolidated financial statements. In March 2016, the FASB issued Accounting Standards Update No. 2016-04, "Liabilities - Extinguishment of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Products" (ASU 2016-04), which requires an entity to recognize breakage for a liability resulting from the sale of a prepaid stored-value product in proportion to the pattern of rights expected to be exercised by the product holder only to the extent that it is probable that a significant reversal of the recognized breakage amount will not subsequently occur. The new standard is effective for us on July 1, 2018. The standard should be applied either retrospectively to each period presented or by means of a cumulative adjustment to retained earnings as of the beginning of the fiscal year adopted. We adopted the new standard on July 1, 2018. The new standard did not have a material effect on our consolidated financial statements. In May 2014, the FASB issued Accounting Standards Update No. 2014-09, "Revenue from Contracts with Customers" (ASU 2014-09), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This guidance replaced most existing revenue recognition guidance in U.S. GAAP. The new standard is effective for us as of July 1, 2018. The standard permits the use of either the retrospective or modified retrospective method. We adopted the new standard during the first quarter of fiscal 2019. Refer to the information above for additional details of the adoption. Issued Accounting Standards to be Adopted In August 2018, the FASB issued Accounting Standards Update No. 2018-15 "Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40)" (ASU 2018-15), which requires a customer in a cloud computing arrangement that is a service contract to follow the internal use software guidance in ASC 350-40 to determine which implementation costs to capitalize as assets or expense as incurred. The new standard is effective for us on July 1, 2020. We are currently evaluating the requirements of the standard, and we have not yet determined the impact of adoption on our consolidated financial statements. In August 2017, the FASB issued Accounting Standards Update No. 2017-12, "Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities (Topic 815)," (ASU 2017-12), which better aligns a company’s financial reporting for hedging activities with the economic objectives of those activities. The amendment is effective for us on July 1, 2019 and permits early adoption, including adoption in an interim period. The standard requires a modified retrospective transition approach, in which we will recognize the cumulative effect of the change on the opening balance of each affected component of equity in the statement of financial position as of the date of adoption. We do not expect this standard to have material impact on our consolidated financial statements. In March 2016, the FASB issued Accounting Standards Update No. 2016-02, "Leases (Topic 842)" (ASU 2016-02), which requires the recognition of lease assets and lease liabilities by lessees for those leases currently classified as operating leases. The standard also retains a distinction between finance leases and operating leases. The new standard is effective for us on July 1, 2019 and we expect to adopt the new standard using the modified retrospective approach. We also plan to use the transition relief package, in which we will not reassess the classification of our existing leases, whether any expired or existing contracts contain leases and if our existing leases have any initial direct costs. We have substantially completed the process of collecting our existing lease contracts and we are currently implementing changes to our systems and processes. While we expect the new standard to have a material impact on our consolidated balance sheet, we have not yet determined the full impact of adoption on our consolidated financial statements.

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