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 as part of the acquisition, resulting in $61.5 million net cash paid for KBZ.

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 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 March 31, 2017, 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 and identifiable intangible assets are expected to be fully 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 nine months ended March 31, 2017.



	Quarter ended March 31, 2017			Nine months ended March 31, 2017
Net Sales	$	8,893		$	20,244
Amortization of intangible assets	1,586			3,701
Change in fair value of contingent consideration	3,289			6,457
Operating income (loss)	(656		)	(942		)
Net income (loss)	$	(403	)	$	(392	)

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 nine months ended March 31, 2016, the Company has not provided for a change in fair value of contingent consideration.



	Quarter ended March 31, 2017				Nine months ended March 31, 2017
	(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	$	813,538	$	813,538	$	2,650,895	$	2,656,111
Operating income	19,978		19,978		66,128		67,580
Net Income	12,424		12,424		50,276		51,361
Earnings per share:
Basic	$	0.49	$	0.49	$	1.99	$	2.03
Diluted	$	0.49	$	0.49	$	1.97	$	2.02

(1) There were no acquisition costs in the pro forma results presented for the quarter ended March 31, 2017.

(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 nine months ended March 31, 2017. Net income, net of tax, includes additional amortization expense of $0.7 million and additional depreciation expense of $0.1 million for the nine months ended March 31, 2017. Adjustments also include additional income tax expense of $0.8 million and adding back acquisition costs of $0.5 million.



	Quarter ended March 31, 2016				Nine months ended March 31, 2016
	(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	$	798,404	$	805,097	$	2,662,754	$	2,683,588
Operating income	21,647		22,112		77,939		81,483
Net Income	14,042		14,296		50,694		52,768
Earnings per share:
Basic	$	0.54	$	0.55	$	1.90	$	1.97
Diluted	$	0.54	$	0.55	$	1.88	$	1.96

(3) Includes actual results for Intelisys for the quarter ended March 31, 2016. On a gross basis, operating income includes additional amortization expense of $1.6 million and additional depreciation expense of $0.3 million for the quarter ended March 31, 2016. Net income, net of tax, includes additional amortization expense of $1.0 million and additional depreciation expense of $0.2 million for the quarter ended March 31, 2016. Adjustments also include additional income tax expense of $0.8 million.

(4) Includes actual results for Intelisys for the nine months ended March 31, 2016. On a gross basis, operating income includes additional amortization expense of $4.8 million and additional depreciation expense of $0.8 million for the nine months ended March 31, 2016. Net income, net of tax, includes additional amortization expense of $3.0 million and additional depreciation expense of $0.5 million for the nine months ended March 31, 2016. Adjustments also include additional income tax expense of $3.4 million.