Acquisitions

KBZ

On September 4, 2015, the Company acquired substantially all the assets of KBZ Communications, Inc. ("KBZ"), a Cisco Authorized Distributor specializing in video conferencing, services, and cloud. KBZ is part of the Company's Worldwide Barcode, Networking and Security operating segment. This acquisition enables the Company to enhance its focus on Cisco’s solutions, combining the strengths of both companies to provide a more robust portfolio of products, solutions and services.

Under the asset purchase agreement, the Company acquired the assets of KBZ for a cash payment of $64.6 million. The Company acquired $3.1 million of cash during the acquisition, resulting in $61.5 million net cash paid for KBZ. Per the asset purchase agreement, a portion of the purchase price was placed into escrow to indemnify the Company of any pre-acquisition damages. As of December 31, 2016, the balance available in escrow was $5.0 million.

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. Pro forma results of operations have not been presented for this acquisition because the results of this acquisition are not material to our consolidated results. The purchase price allocation is as follows:



	KBZ
	(in thousands)
Receivables, net	$	63,131
Inventory	11,227
Other Current Assets	10,303
Property and equipment, net	677
Goodwill	21,639
Identifiable intangible assets	18,400
Other non-current assets	1,399
	$	126,776
Accounts payable	$	48,271
Accrued expenses and other current liabilities	14,863
Other long-term liabilities	2,167
Consideration transferred, net of cash acquired	61,475
	$	126,776

Intangible assets acquired include trade names, customer relationships, and non-compete agreements.

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 and Services operating segment. With this acquisition, the Company broadens its capabilities in the telecom and cloud services market and generates the opportunity for high-growth recurring revenue.

Under the asset purchase agreement, the Company structured the purchase transaction with 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, plus 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 during the acquisition, resulting in $83.8 million net cash paid for Intelisys initially. Per the asset purchase agreement, a portion of the purchase price was placed into escrow to indemnify the Company of any pre-acquisition damages. As of December 31, 2016, the balance available in escrow was $8.5 million.

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 in its entirety is expected to be deductible for tax purposes.



	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

Following the acquisition date, Intelisys contributed the following results to the Condensed Consolidated Income Statement for the quarter and six months ended December 31, 2016.



	Quarter ended December 31, 2016			Six months ended December 31, 2016
Net Sales	$	8,487		$	11,350
Amortization of intangible assets	1,585			2,115
Change in fair value of contingent consideration	2,337			3,167
Operating income (loss)	(151		)	(286		)
Net income (loss)	$	311		$	11

The following tables summarize the Company's unaudited consolidated pro forma results of operations as though the acquisition happened on July 1, 2015. The pro forma consolidated financial statements do not necessarily reflect what the combined company's financial condition or results from operations would have been had the acquisition occurred on the dates indicated. They also may not be useful in predicting the future financial condition and results of operations of the combined company. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.

For the two months ended August 31, 2016 and the quarter and six months ended December 31, 2015, the Company has not provided for a change in fair value of contingent consideration.



	Quarter ended December 31, 2016				Six months ended December 31, 2016
	(in thousands, except per share data)				(in thousands, except per share data)
	As Reported, Consolidated		Pro forma, Consolidated ⁽¹⁾		As Reported, Consolidated		Pro forma, Consolidated ⁽²⁾
Net Sales	$	904,792	$	904,792	$	1,837,357	$	1,842,573
Operating income	23,275		23,358		46,150		47,602
Net Income	23,036		23,119		37,852		38,937
Earnings per share:
Basic	$	0.92	$	0.92	$	1.49	$	1.54
Diluted	$	0.91	$	0.91	$	1.48	$	1.53

(1) Pro forma results add back $0.1 million of acquisition costs for the quarter ended December 31, 2016.

(2) Pro forma results include actual results from Intelisys for the two months ended August 31, 2016. Adjustments include additional amortization and depreciation expense as if the fair value of identifiable intangible assets, including software, had been recorded on July 1, 2015. On a gross basis, operating income includes additional amortization expense of $1.1 million and additional depreciation expense of $0.2 million for the six months ended December 31, 2016. Net income, net of tax, includes additional amortization expense of $0.7 million and additional depreciation expense of $0.1 million for the six months ended December 31, 2016. Adjustments also include additional income tax expense of $0.8 million and adding back acquisition costs of $0.5 million.



	Quarter ended December 31, 2015				Six months ended December 31, 2015
	(in thousands, except per share data)				(in thousands, except per share data)
	As Reported, Consolidated		Pro forma, Consolidated ⁽³⁾		As Reported, Consolidated		Pro forma, Consolidated ⁽⁴⁾
Net Sales	$	993,522	$	1,000,440	$	1,864,350	$	1,878,491
Operating income	31,852		32,821		56,293		59,371
Net Income	20,656		21,152		36,652		38,471
Earnings per share:
Basic	$	0.78	$	0.79	$	1.35	$	1.42
Diluted	$	0.77	$	0.79	$	1.34	$	1.40

(3) Includes actual results for Intelisys for the quarter ended December 31, 2015. On a gross basis, operating income includes additional amortization expense was $1.6 million and additional depreciation expense was $0.3 million for the quarter ended December 31, 2015. Net income, net of tax, includes additional amortization expense was $1.0 million and additional depreciation expense was $0.2 million for the quarter ended December 31, 2015. Adjustments also include additional income tax expense of $1.1 million.

(4) Includes actual results for Intelisys for the six months ended December 31, 2015. On a gross basis, operating income includes additional amortization expense of $3.2 million and additional depreciation expense of $0.5 million for the six months ended December 31, 2015. Net income, net of tax, includes additional amortization expense of $2.0 million and additional depreciation expense of $0.3 million for the six months ended December 31, 2015. Adjustments also include additional income tax expense of $2.6 million.