XML 32 R16.htm IDEA: XBRL DOCUMENT
v3.10.0.1

Fair Value of Financial Instruments | 12 Months Ended
--- | ---
Jun. 30, 2018
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:
• | 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).
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:
| 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 |
The following table presents assets and liabilities measured at fair value on a recurring basis as of June 30, 2017:
| 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 |
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.
| 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 |
(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:
| 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 |
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:
• | 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.
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.
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 | %
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:
| Contingent Consideration
| (in thousands)
Fiscal year: |
2019 | $ | 42,975 |
2020 | 32,239 |
2021 | 33,019 |
Total contingent consideration payments | $ | 108,233 |

X
- References No definition available. + Details
Name: | us-gaap_FairValueDisclosuresAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -URI http://asc.fasb.org/topic&trid=2155941 + Details
Name: | us-gaap_FairValueDisclosuresTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration