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EX-32.1 - EXHIBIT 32.1 CERTIFICATION PURSUANT TO SECTION 906 OF SARBANES OXLEY ACT - CIMPRESS N.V.ex32112311710-q.htm
EX-31.2 - EXHIBIT 31.2 CERTIFICATION OF CFO - CIMPRESS N.V.ex31212311710-q.htm
EX-31.1 - EXHIBIT 31.1 CERTIFICATION OF CEO - CIMPRESS N.V.ex31112311710-q.htm




 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________
Form 10-Q
(Mark One)
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended December 31, 2017
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from               to               
Commission file number 000-51539
_________________________________
Cimpress N.V.
(Exact Name of Registrant as Specified in Its Charter)
_________________________________
The Netherlands
 
98-0417483
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification No.) 
Hudsonweg 8
5928 LW Venlo
The Netherlands
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code: 31-77-850-7700
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class
 
Name of Exchange on Which Registered
Ordinary Shares, €0.01 par value
 
NASDAQ Global Select Market
_________________________________

Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ     No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes þ     No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer  þ
 
Accelerated filer  o
 
Non-accelerated filer  o
 
 
Smaller reporting company  o
 
(Do not check if a smaller reporting company)
 
 
Emerging growth company  o
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o
     Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).  Yes o     No þ
As of January 26, 2018, there were 30,665,446 Cimpress N.V. ordinary shares, par value 0.01 per share, outstanding.

 



CIMPRESS N.V.
QUARTERLY REPORT ON FORM 10-Q
For the Three and Six Months Ended December 31, 2017

TABLE OF CONTENTS
 
 
Page
PART I FINANCIAL INFORMATION
 
Item 1. Financial Statements (unaudited)
     Consolidated Balance Sheets as of December 31, 2017 and June 30, 2017
     Consolidated Statements of Operations for the three and six months ended December 31, 2017 and 2016
     Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended December 31, 2017 and 2016
     Consolidated Statements of Cash Flows for the six months ended December 31, 2017 and 2016
     Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
 
 
 
Part II OTHER INFORMATION
 
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
Signatures








PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CIMPRESS N.V.
CONSOLIDATED BALANCE SHEETS
(unaudited in thousands, except share and per share data)

December 31,
2017

June 30,
2017
Assets
 


 

Current assets:
 


 

Cash and cash equivalents
$
40,064


$
25,697

Accounts receivable, net of allowances of $7,426 and $3,590, respectively
66,876


48,630

Inventory
55,263


46,563

Prepaid expenses and other current assets
73,282


78,835

Assets held for sale

 
46,276

Total current assets
235,485


246,001

Property, plant and equipment, net
507,299


511,947

Software and website development costs, net
52,040


48,470

Deferred tax assets
66,022


48,004

Goodwill
531,199


514,963

Intangible assets, net
258,657


275,924

Other assets
28,238


34,560

Total assets
$
1,678,940


$
1,679,869

Liabilities, noncontrolling interests and shareholders’ equity
 


 

Current liabilities:
 


 

Accounts payable
$
165,798


$
127,386

Accrued expenses
219,707


175,567

Deferred revenue
28,824


30,372

Short-term debt
35,569

 
28,926

Other current liabilities
89,269

 
78,435

Liabilities held for sale

 
8,797

Total current liabilities
539,167


449,483

Deferred tax liabilities
57,008


60,743

Lease financing obligation
104,737

 
106,606

Long-term debt
664,961


847,730

Other liabilities
107,884


94,683

Total liabilities
1,473,757


1,559,245

Commitments and contingencies (Note 13)
 
 
 
Redeemable noncontrolling interests
85,478


45,412

Shareholders’ equity:
 


 

Preferred shares, par value €0.01 per share, 100,000,000 shares authorized; none issued and outstanding



Ordinary shares, par value €0.01 per share, 100,000,000 shares authorized; 44,080,627 shares issued; and 30,973,620 and 31,415,503 shares outstanding, respectively
615


615

Treasury shares, at cost, 13,107,007 and 12,665,124 shares, respectively
(638,414
)

(588,365
)
Additional paid-in capital
378,121


361,376

Retained earnings
462,205


414,771

Accumulated other comprehensive loss
(83,093
)

(113,398
)
Total shareholders’ equity attributable to Cimpress N.V.
119,434


74,999

Noncontrolling interests (Note 10)
271

 
213

Total shareholders' equity
119,705

 
75,212

Total liabilities, noncontrolling interests and shareholders’ equity
$
1,678,940


$
1,679,869

See accompanying notes.

1


CIMPRESS N.V.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited in thousands, except share and per share data)
 
Three Months Ended December 31,
 
Six Months Ended December 31,
 
2017
 
2016
 
2017
 
2016
Revenue
$
762,054

 
$
576,851

 
$
1,325,338

 
$
1,020,564

Cost of revenue (1)
360,285

 
276,366

 
644,040

 
489,416

Technology and development expense (1)
59,228

 
56,282

 
121,331

 
115,292

Marketing and selling expense (1)
200,785

 
151,358

 
366,878

 
284,026

General and administrative expense (1)
44,988

 
48,161

 
83,766

 
104,741

Amortization of acquired intangible assets
12,558

 
9,879

 
25,191

 
20,092

Restructuring expense (1)
11,501

 
1,100

 
12,355

 
1,100

(Gain) on sale of subsidiaries

 

 
(47,545
)
 

Income from operations
72,709

 
33,705

 
119,322

 
5,897

Other (expense) income, net
(7,732
)
 
30,549

 
(24,044
)
 
28,417

Interest expense, net
(12,529
)
 
(9,631
)
 
(25,611
)
 
(19,535
)
Income before income taxes
52,448

 
54,623

 
69,667

 
14,779

Income tax expense
21,825

 
19,601

 
15,638

 
9,787

Net income
30,623

 
35,022

 
54,029

 
4,992

Add: Net (income) loss attributable to noncontrolling interest
(688
)
 
6

 
(731
)
 
933

Net income attributable to Cimpress N.V.
$
29,935

 
$
35,028

 
$
53,298

 
$
5,925

Basic net income per share attributable to Cimpress N.V.
$
0.96

 
$
1.12

 
$
1.71

 
$
0.19

Diluted net income per share attributable to Cimpress N.V.
$
0.93

 
$
1.07

 
$
1.65

 
$
0.18

Weighted average shares outstanding — basic
31,026,043

 
31,291,356

 
31,123,177

 
31,431,090

Weighted average shares outstanding — diluted
32,319,022

 
32,614,013

 
32,325,592

 
32,846,275

____________________________________________
(1) Share-based compensation is allocated as follows:
 
Three Months Ended December 31,
 
Six Months Ended December 31,
 
2017
 
2016
 
2017
 
2016
Cost of revenue
$
95

 
$
75

 
$
135

 
$
118

Technology and development expense
2,818

 
3,118

 
4,674

 
5,443

Marketing and selling expense
1,858

 
1,480

 
2,843

 
2,300

General and administrative expense
8,037

 
6,604

 
11,965

 
14,987

Restructuring expense
506

 

 
609

 


See accompanying notes.

2


CIMPRESS N.V.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited in thousands)

 
Three Months Ended December 31,
 
Six Months Ended December 31,
 
2017
 
2016
 
2017
 
2016
Net income
$
30,623

 
$
35,022

 
$
54,029

 
$
4,992

Other comprehensive income (loss), net of tax:

 

 

 
 
Foreign currency translation gains (losses), net of hedges
11,827

 
(47,148
)
 
39,134

 
(37,970
)
Net unrealized gains on derivative instruments designated and qualifying as cash flow hedges
3,159

 
9,244

 
6,730

 
7,475

Amounts reclassified from accumulated other comprehensive loss to net income on derivative instruments
(1,370
)
 
(6,426
)

(4,134
)
 
(5,594
)
Unrealized loss on available-for-sale-securities

 
(4,832
)
 

 
(5,756
)
Amounts reclassified from accumulated other comprehensive loss to net income for realized gains on available-for-sale securities


2,268




2,268

Gain on pension benefit obligation, net

 



 
36

Comprehensive income (loss)
44,239

 
(11,872
)
 
95,759

 
(34,549
)
Add: Comprehensive (income) loss attributable to noncontrolling interests
(1,650
)
 
4,235

 
(4,734
)
 
4,625

Total comprehensive income (loss) attributable to Cimpress N.V.
$
42,589

 
$
(7,637
)
 
$
91,025

 
$
(29,924
)
See accompanying notes.


3


CIMPRESS N.V.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited in thousands)

Six Months Ended December 31,
 
2017

2016
Operating activities
 


 

Net income
$
54,029


$
4,992

Adjustments to reconcile net income to net cash provided by operating activities:
 


 

Depreciation and amortization
83,683


72,382

Share-based compensation expense
20,226


22,848

Deferred taxes
(6,869
)

(17,508
)
Gain on sale of subsidiaries
(47,545
)
 

Change in contingent earn-out liability
1,774

 
22,766

Gain on sale of available-for-sale securities


(2,268
)
Unrealized loss (gain) on derivatives not designated as hedging instruments included in net income
4,541


(4,573
)
Effect of exchange rate changes on monetary assets and liabilities denominated in non-functional currency
13,275


(13,246
)
Other non-cash items
817


1,719

Changes in operating assets and liabilities:
 


 

Accounts receivable
(16,456
)

822

Inventory
(7,357
)

(4,187
)
Prepaid expenses and other assets
(4,174
)

(14,290
)
Accounts payable
43,604


21,808

Accrued expenses and other liabilities
37,194


23,394

Net cash provided by operating activities
176,742


114,659

Investing activities
 


 

Purchases of property, plant and equipment
(38,674
)
 
(36,260
)
Proceeds from the sale of subsidiaries, net of transaction costs and cash divested
93,779



Business acquisitions, net of cash acquired
(110
)
 
(206,816
)
Purchases of intangible assets
(278
)
 
(88
)
Capitalization of software and website development costs
(18,114
)
 
(19,110
)
Proceeds from sale of available-for-sale securities

 
6,346

Other investing activities
(669
)
 
1,227

Net cash provided by (used in) investing activities
35,934


(254,701
)
Financing activities
 
 
 
Proceeds from borrowings of debt
311,349

 
447,000

Payments of debt and debt issuance costs
(490,717
)
 
(247,771
)
Payments of withholding taxes in connection with equity awards
(2,098
)
 
(8,864
)
Payments of capital lease obligations
(9,462
)
 
(6,814
)
Purchase of ordinary shares
(55,139
)
 
(50,008
)
Purchase of noncontrolling interests

 
(20,230
)
Proceeds from issuance of ordinary shares
9,019

 
257

Issuance of loans
(12,000
)


Proceeds from sale of noncontrolling interest
35,390

 

Capital contribution from noncontrolling interest

 
1,404

Other financing activities
(83
)
 
1,281

Net cash (used in) provided by financing activities
(213,741
)
 
116,255

Effect of exchange rate changes on cash
3,390

 
(4,051
)
Change in cash held for sale
12,042

 

Net increase (decrease) in cash and cash equivalents
14,367

 
(27,838
)
Cash and cash equivalents at beginning of period
25,697

 
77,426

Cash and cash equivalents at end of period
$
40,064

 
$
49,588

See accompanying notes.

4


CIMPRESS N.V.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(unaudited in thousands)
 
Six Months Ended December 31,
 
2017
 
2016
Supplemental disclosures of cash flow information:
 
 
 
Cash paid during the period for:
 
 
 
Interest
$
25,863

 
$
20,155

Income taxes
10,452

 
20,309

Non-cash investing and financing activities:
 
 
 
Property and equipment acquired under capital leases
$
112

 
$
4,912

Amounts accrued related to business acquisitions
52,472

 
27,155

See accompanying notes.

5


CIMPRESS N.V.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited in thousands, except share and per share data)

1. Description of the Business
We are a technology driven company that aggregates, largely via the internet, large volumes of small, individually customized orders for a broad spectrum of print, signage, apparel and similar products. We operate in a largely decentralized manner. Our businesses, discussed in more detail below, fulfill orders with manufacturing capabilities that include Cimpress owned and operated manufacturing facilities and a network of third-party fulfillers to create customized products on demand. Those businesses bring their products to market through a portfolio of customer-focused brands serving the needs of micro, small and medium sized businesses, resellers and consumers. These brands include Vistaprint, our global brand for micro business marketing products and services, as well as brands that we have acquired that serve the needs of various market segments, including resellers, micro, small and medium sized businesses with differentiated service needs, and consumers purchasing products for themselves and their families.
2. 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.
    
Operating results for the three and six months ended December 31, 2017 are not necessarily indicative of the results that may be expected for the year ending June 30, 2018 or for any other period. The consolidated balance sheet at June 30, 2017 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, 2017 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.

Share-based compensation
Total share-based compensation costs were $13,314 and $20,226 for the three and six months ended December 31, 2017, respectively, and $11,277 and $22,848 for the three and six months ended December 31, 2016, respectively.
During the first quarter of fiscal 2018, we issued supplemental performance share unit awards to certain members of management. In addition to a service vesting and market condition (based on the three year moving average of the Cimpress share price) contained in our standard performance share units, these supplemental awards also contain a multi-year financial performance condition. The evaluation of achievement of the

6


performance condition is at the discretion of the Compensation Committee and, therefore, is subject to mark-to-market accounting throughout the three year performance vesting period. The compensation expense for these awards is estimated at fair value using a Monte Carlo simulation valuation model and compensation costs are recorded only if it is probable that the performance condition will be achieved. We have concluded that the performance condition is currently probable of achievement and for the three and six months ended December 31, 2017, we recognized $4,310 of share-based compensation expense. We will continue to reassess the probability each reporting period and if we determine the awards are not probable at some point during the performance vesting period we would reverse any expense recognized to date.
Sale of Albumprinter
On August 31, 2017 we sold our Albumprinter business, including FotoKnudsen AS, for a total of €78,382 ($93,071 based on the exchange rate as of the date of sale) in cash, net of transaction costs and cash divested (after $11,874 in pre-closing dividends). As a result of the sale, we recognized a gain of $47,545, net of transaction costs, within our consolidated statement of operations for the six months ended December 31, 2017.

The transaction did not qualify for discontinued operations presentation, and as of June 30, 2017, the Albumprinter business assets and liabilities were presented as held-for-sale in our consolidated balance sheet. In connection with the divestiture, we entered into an agreement with Albumprinter under which Albumprinter will continue to fulfill photo book orders for our Vistaprint business. Additionally, we agreed to provide Albumprinter with certain transitional support services for a period of up to one year from the date of the sale.

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 December 31,

Six Months Ended December 31,
 
2017

2016

2017

2016
(Losses) gains on derivatives not designated as hedging instruments (1)
$
(1,752
)

$
13,477


$
(10,001
)

$
13,554

Currency-related (losses) gains, net (2)
(6,449
)

14,988


(14,652
)

12,022

Other gains (3)
469


2,084


609


2,841

Total other (expense) income, net
$
(7,732
)

$
30,549


$
(24,044
)

$
28,417

_____________________
(1) Primarily relates to both realized and unrealized (losses) gains on derivative currency forward and option contracts not designated as hedging instruments.
(2) We have significant non-functional currency intercompany financing relationships, which we may alter at times, and are subject to currency exchange rate volatility. The currency-related (losses) gains, net for the three and six months ended December 31, 2017 and 2016 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 losses related to cross-currency swaps were $2,016 and $6,126 for the three and six months ended December 31, 2017, respectively, and unrealized gains of $7,827 and $6,393 for the three and six months ended December 31, 2016, respectively.
(3) We recognized a gain of $377 related to insurance recoveries during the three and six months ended December 31, 2017. During the prior comparative periods we recognized a gain of $2,268 related to the sale of Plaza Create Co. Ltd. available for sale securities.
Net Income Per Share Attributable to Cimpress N.V.
Basic net income per share attributable to Cimpress N.V. is computed by dividing net income attributable to Cimpress N.V. by the weighted-average number of ordinary shares outstanding for the respective period. Diluted net income 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

7


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 December 31,
 
Six Months Ended December 31,
 
2017
 
2016
 
2017
 
2016
Weighted average shares outstanding, basic
31,026,043

 
31,291,356

 
31,123,177

 
31,431,090

Weighted average shares issuable upon exercise/vesting of outstanding share options/RSUs/RSAs
1,292,979

 
1,322,657

 
1,202,415

 
1,415,185

Shares used in computing diluted net income per share attributable to Cimpress N.V.
32,319,022

 
32,614,013

 
32,325,592

 
32,846,275

Weighted average anti-dilutive shares excluded from diluted net income per share attributable to Cimpress N.V.

 
28,031

 
4,582

 
22,586

Waltham Lease Arrangement
In July 2013, we executed a lease agreement to move our Lexington, Massachusetts, USA operations to a then yet to be constructed facility in Waltham, Massachusetts, USA. During the first quarter of fiscal 2016, the building was completed and we commenced lease payments in September 2015 and will make lease payments through September 2026.
For accounting purposes, we were deemed to be the owner of the Waltham building during the construction period, and accordingly we recorded the construction project costs incurred by the landlord as an asset with a corresponding financing obligation on our balance sheet. We evaluated the Waltham lease in the first quarter of fiscal 2016 and determined that the transaction did not meet the criteria for "sale-leaseback" treatment due to our planned subleasing activity over the term of the lease. Accordingly, we began depreciating the asset and incurring interest expense related to the financing obligation recorded on our consolidated balance sheet. We bifurcate the lease payments pursuant to the Waltham lease into (i) a portion that is allocated to the building and (ii) a portion that is allocated to the land on which the building was constructed. The portion of the lease obligations allocated to the land is treated as an operating lease that commenced in fiscal 2014.

Property, plant and equipment, net, included $113,985 and $116,045 as of December 31, 2017 and June 30, 2017, respectively, related to the building. The financing lease obligation and deferred rent credit related to the building on our consolidated balance sheets was $117,307 and $119,176 as of December 31, 2017 and June 30, 2017, respectively.
Treasury Shares
    
Treasury shares are accounted for using the cost method and are included as a component of shareholders' equity. During the six months ended December 31, 2017 and 2016, we repurchased 574,264 and 593,763, respectively, of our ordinary shares for a total cost of $55,139 and $50,008, respectively, inclusive of transaction costs, in connection with our publicly announced share repurchase programs.
Recently Issued or Adopted Accounting Pronouncements
New Accounting Standards Adopted
In October 2016, the FASB issued Accounting Standards Update No. 2016-16, "Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory" (ASU 2016-16), which requires the recognition for income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. We elected to early adopt the new standard during the first quarter of fiscal 2018, and recognized a reduction to prepaid and other current assets of $24,573, an increase in deferred tax assets of $18,710 and a cumulative-effect adjustment to retained earnings of $5,863. If we had not early adopted, the forecasted fiscal 2018 tax expense would be lower by $9,787.

8


Issued Accounting Standards to be Adopted
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 the Company 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 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. The new standard requires changes to the terms or conditions of a share-based payment award 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. The amendment is effective for us on July 1, 2018 and permits early adoption. The amendment is to be applied prospectively, and we are currently evaluating the impact on our 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 and restricted cash equivalents 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. The amendment is effective for us on July 1, 2018 and permits early adoption. This amendment will affect the presentation of our statement of cash flows once adopted, and we do not expect it to have material impact 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 permits early adoption and 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 do not expect the effect of ASU 2016-04 to have a 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. The standard permits early adoption. We are currently evaluating our adoption timing and the effect that ASU 2016-02 will have 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 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard is effective for fiscal years beginning after December 15, 2017, which would result in an effective date for us of July 1, 2018. The standard permits the use of either the retrospective or modified retrospective method. We will adopt the new standard in the first quarter of fiscal 2019, and we will apply the modified retrospective approach. We are actively evaluating the impact of the new standard on a business unit by business unit basis through a review of contract terms and material revenue streams. Our ongoing assessment includes both the quantification of any material impacts, as well as the related disclosures.

9


3. Fair Value Measurements
We use a three-level valuation hierarchy for measuring fair value and include detailed financial statement disclosures about fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:
Level 1: Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2: Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in markets that are not active and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The following tables summarize our assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy:
 
December 31, 2017
 
Total
 
Quoted Prices in
Active
Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets
 
 
 
 
 
 
 
Interest rate swap contracts
$
3,159

 
$

 
$
3,159

 
$

Currency forward contracts
529

 

 
529

 

Total assets recorded at fair value
$
3,688

 
$

 
$
3,688

 
$

 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Interest rate swap contracts
$
(146
)
 
$

 
$
(146
)
 
$

Cross-currency swap contracts
(33,872
)
 

 
(33,872
)
 

Currency forward contracts
(28,223
)
 

 
(28,223
)
 

Currency option contracts
(557
)
 

 
(557
)
 

Contingent consideration
(5,942
)
 

 

 
(5,942
)
Total liabilities recorded at fair value
$
(68,740
)
 
$

 
$
(62,798
)
 
$
(5,942
)


10


 
June 30, 2017
 
Total
 
Quoted Prices in
Active
Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
Assets
 
 
 
 
 
 
 
Interest rate swap contracts
$
1,717

 
$

 
$
1,717

 
$

Total assets recorded at fair value
$
1,717

 
$

 
$
1,717

 
$

 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Interest rate swap contracts
$
(483
)
 
$

 
$
(483
)
 
$

Cross-currency swap contracts
(19,760
)
 

 
(19,760
)
 

Currency forward contracts
(14,700
)
 

 
(14,700
)
 

Currency option contracts
(651
)
 

 
(651
)
 

Contingent consideration
(5,453
)
 

 

 
(5,453
)
Total liabilities recorded at fair value
$
(41,047
)
 
$

 
$
(35,594
)
 
$
(5,453
)
During the quarter ended December 31, 2017 and year ended June 30, 2017, there were no significant transfers in or out of Level 1, Level 2 and Level 3 classifications.
The valuations of the derivatives intended to mitigate our interest rate and currency risk are determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each instrument. This analysis utilizes observable market-based inputs, including interest rate curves, interest rate volatility, or spot and forward exchange rates, and reflects the contractual terms of these instruments, including the period to maturity. We incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparties' nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements.
Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to appropriately reflect both our own nonperformance risk and the respective counterparties' nonperformance risk in the fair value measurement. However, as of December 31, 2017, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we have determined that our derivative valuations in their entirety are classified in Level 2 in the fair value hierarchy.
Contingent consideration obligations are measured at fair value and are based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The valuation of contingent consideration uses assumptions and estimates to forecast a range of outcomes and probabilities for the contingent consideration. Certain contingent consideration obligations are valued using a Monte Carlo simulation model. We assess these assumptions and estimates on a quarterly basis as additional data impacting the assumptions is obtained. Any changes in the fair value of contingent consideration related to updated assumptions and estimates will be recognized within general and administrative expenses in the consolidated statements of operations during the period in which the change occurs.
As part of the acquisition of WIRmachenDRUCK on February 1, 2016, we agreed to a variable contingent payment up to €40,000, previously based on the achievement of a cumulative gross profit target for calendar years 2016 and 2017. During the fourth quarter of fiscal 2017, we determined it was reasonably certain, based on recent performance, that the maximum earn-out would be achieved. Subsequently, during the first quarter of fiscal 2018, we amended the terms of this arrangement to remove the performance target and agreed to pay the maximum amount in January 2018. As of December 31, 2017, the fair value of the liability is $47,994 and on January 2, 2018 we paid the maximum amount. Of the total liability, $5,942 is considered contingent consideration and included in the table below and the remaining portion of the liability is classified as a compensation arrangement as discussed in Note 7.

11


The following table represents the changes in fair value of Level 3 contingent consideration:
 
Six Months Ended December 31,
 
2017 (1)
 
2016 (2)
Balance at June 30
$
5,453

 
$
1,212

Fair value adjustment
220

 
1,946

Foreign currency impact
269

 
(134
)
Balance at December 31
$
5,942

 
$
3,024

_____________________
(1) Classified as a current liability on the consolidated balance sheet.
(2) Classified as a long-term liability on the consolidated balance sheet.

As of December 31, 2017 and June 30, 2017, the carrying amounts of our cash and cash equivalents, accounts receivable, accounts payable, and other current liabilities approximated their estimated fair values. As of December 31, 2017 and June 30, 2017 the carrying value of our debt, excluding debt issuance costs and debt discounts, was $708,560 and $882,578, respectively, and the fair value was $716,837 and $906,744, respectively. Our debt at December 31, 2017 includes variable rate debt instruments indexed to LIBOR that resets periodically and fixed rate debt instruments. The estimated fair value of our debt was determined using available market information based on recent trades or activity of debt instruments with substantially similar risks, terms and maturities, which fall within Level 2 under the fair value hierarchy. The estimated fair value of assets and liabilities disclosed above may not be representative of actual values that could have been or will be realized in the future.
4. Derivative Financial Instruments
We use derivative financial instruments, such as interest rate swap contracts, cross-currency swap contracts, and currency forward and option contracts, to manage interest rate and foreign currency exposures. Derivatives are recorded in the consolidated balance sheets at fair value. If the derivative is designated as a cash flow hedge or net investment hedge, then the effective portion of changes in the fair value of the derivative is recorded in accumulated other comprehensive loss and is subsequently reclassified into earnings in the period the hedged forecasted transaction affects earnings. If a derivative is deemed to be ineffective, then the ineffective portion of the change in fair value of the derivative is recognized directly in earnings. The change in the fair value of derivatives not designated as hedges is recognized directly in earnings, as a component of other (expense) income, net.
Hedges of Interest Rate Risk
We enter into interest rate swap contracts to manage variability in the amount of our known or expected cash payments related to a portion of our debt. Our objective in using interest rate swaps is to add stability to interest expense and to manage our exposure to interest rate movements. We designate our interest rate swaps as cash flow hedges. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for us making fixed-rate payments over the life of the contract agreements without exchange of the underlying notional amount. Realized gains or losses from interest rate swaps are recorded in earnings, as a component of interest expense, net. A portion of seven of our interest rate swap contracts were deemed to be ineffective during the three and six months ended December 31, 2017 and during the three and six months ended December 31, 2016 a portion of one of our interest rate swap contracts was deemed to be ineffective.
Amounts reported in accumulated other comprehensive loss related to interest rate swap contracts will be reclassified to interest expense as interest payments are accrued or made on our variable-rate debt. As of December 31, 2017, we estimate that $385 will be reclassified from accumulated other comprehensive loss to interest expense during the twelve months ending December 31, 2018. As of December 31, 2017, we had nine outstanding interest rate swap contracts indexed to one-month LIBOR. These instruments were designated as cash flow hedges of interest rate risk and have varying start dates and maturity dates through December 2025.
Interest rate swap contracts outstanding:
 
Notional Amounts
Contracts accruing interest as of December 31, 2017
 
$
65,000

Contracts with a future start date
 
350,000

Total
 
$
415,000


12


Hedges of Currency Risk
Cross-Currency Swap Contracts
From time to time, we execute cross-currency swap contracts designated as cash flow hedges or net investment hedges. Cross-currency swaps involve an initial receipt of the notional amount in the hedge currency in exchange for our reporting currency based on a contracted exchange rate. Subsequently, we receive fixed rate payments in our reporting currency in exchange for fixed rate payments in the hedged currency over the life of the contract. At maturity, the final exchange involves the receipt of our reporting currency in exchange for the notional amount in the hedged currency.
Cross-currency swap contracts designated as cash flow hedges are executed to mitigate our currency exposure to the interest receipts as well as the principal remeasurement and repayment associated with certain intercompany loans denominated in a currency other than our reporting currency, the U.S. Dollar. As of December 31, 2017, we had two outstanding cross-currency swap contracts designated as cash flow hedges with a total notional amount of $120,011, both maturing during June 2019. We entered into the two cross-currency swap contracts to hedge the risk of changes in one Euro denominated intercompany loan entered into with one of our consolidated subsidiaries that has the Euro as its functional currency.
Amounts reported in accumulated other comprehensive loss will be reclassified to other (expense) income, net as interest payments are accrued or paid and upon remeasuring the intercompany loan. As of December 31, 2017, we estimate that $1,154 of income will be reclassified from accumulated other comprehensive loss to interest expense, net during the twelve months ending December 31, 2018.
Cross-currency swap contracts designated as net investment hedges are executed to mitigate our currency exposure of net investments in subsidiaries that have reporting currencies other than the U.S. Dollar. As of December 31, 2017, we had two outstanding cross-currency swap contracts designated as net investment hedges with a total notional amount of $122,969, both maturing during April 2019. We entered into the two cross-currency swap contracts to hedge the risk of changes in the U.S. Dollar equivalent value of a portion of our net investment in a consolidated subsidiary that has the Euro as its functional currency. Amounts reported in accumulated other comprehensive loss are recognized as a component of our cumulative translation adjustment.
We did not hold any ineffective cross-currency swaps during the three and six months ended December 31, 2017 and 2016.
Other Currency Contracts
We execute currency forward and option contracts in order to mitigate our exposure to fluctuations in various currencies against our reporting currency, the U.S. Dollar.
As of December 31, 2017, we had six currency forward contracts designated as net investment hedges with a total notional amount of $175,262, maturing during various dates through October 2022. We entered into these contracts to hedge the risk of changes in the U.S. Dollar equivalent value of a portion of our net investment in a consolidated subsidiary that has the Euro as its functional currency. Amounts reported in accumulated other comprehensive loss are recognized as a component of our cumulative translation adjustment.
We have elected not to apply hedge accounting for all other currency forward and option contracts. During the three and six months ended December 31, 2017 and 2016, we have experienced volatility within other (expense) income, net in our consolidated statements of operations from unrealized gains and losses on the mark-to-market of outstanding currency forward and option contracts. We expect this volatility to continue in future periods for contracts for which we do not apply hedge accounting. Additionally, since our hedging objectives may be targeted at non-GAAP financial metrics that exclude non-cash items such as depreciation and amortization, we may experience increased, not decreased, volatility in our GAAP results as a result of our currency hedging program.
As of December 31, 2017, we had the following outstanding currency derivative contracts that were not designated for hedge accounting and were used to hedge fluctuations in the U.S. Dollar value of forecasted transactions denominated in Australian Dollar, British Pound, Canadian Dollar, Danish Krone, Euro, Indian Rupee,

13


Mexican Peso, New Zealand Dollar, Norwegian Krone, and Swedish Krona:
Notional Amount
 
Effective Date
 
Maturity Date
 
Number of Instruments
 
Index
$529,938
 
June 2016 through December 2017
 
Various dates through December 2019
 
489
 
Various
Financial Instrument Presentation    
The table below presents the fair value of our derivative financial instruments as well as their classification on the balance sheet as of December 31, 2017 and June 30, 2017:
 
December 31, 2017

Asset Derivatives

Liability Derivatives
Derivatives designated as hedging instruments
Balance Sheet line item

Gross amounts of recognized assets

Gross amount offset in consolidated balance sheet

Net amount

Balance Sheet line item

Gross amounts of recognized liabilities

Gross amount offset in consolidated balance sheet

Net amount
Derivatives in Cash Flow Hedging Relationships
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
Other non-current assets

$
3,518


$
(359
)

$
3,159


Other current liabilities / other liabilities

$
(146
)

$


$
(146
)
Cross-currency swaps
Other non-current assets
 

 

 

 
Other liabilities
 
(14,757
)
 

 
(14,757
)
Derivatives in Net Investment Hedging Relationships
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cross-currency swaps
Other non-current assets
 

 

 

 
Other liabilities
 
(19,115
)
 

 
(19,115
)
Currency forward contracts
Other non-current assets
 

 

 

 
Other liabilities
 
(18,255
)
 

 
(18,255
)
Total derivatives designated as hedging instruments


$
3,518


$
(359
)

$
3,159




$
(52,273
)

$


$
(52,273
)
















Derivatives not designated as hedging instruments















Currency forward contracts
Other current assets / other assets

$
734


$
(205
)

$
529


Other current liabilities / other liabilities

$
(11,043
)

$
1,075


$
(9,968
)
Currency option contracts
Other current assets / other assets







Other current liabilities / other liabilities

(557
)



(557
)
Total derivatives not designated as hedging instruments


$
734


$
(205
)

$
529




$
(11,600
)

$
1,075


$
(10,525
)

14



June 30, 2017

Asset Derivatives

Liability Derivatives
Derivatives designated as hedging instruments
Balance Sheet line item

Gross amounts of recognized assets

Gross amount offset in consolidated balance sheet

Net amount

Balance Sheet line item

Gross amounts of recognized liabilities

Gross amount offset in consolidated balance sheet

Net amount
Derivatives in Cash Flow Hedging Relationships
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
Other non-current assets

$
2,072


$
(355
)

$
1,717


Other current liabilities / other liabilities

$
(483
)

$


$
(483
)
Cross-currency swaps
Other non-current assets







Other liabilities

(7,640
)



(7,640
)
Derivatives in Net Investment Hedging Relationships
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cross-currency swaps
Other non-current assets







Other liabilities

(12,120
)



(12,120
)
Currency forward contracts
Other non-current assets







Other liabilities

(9,896
)



(9,896
)
Total derivatives designated as hedging instruments


$
2,072


$
(355
)

$
1,717




$
(30,139
)

$


$
(30,139
)
















Derivatives not designated as hedging instruments















Currency forward contracts
Other current assets / other assets

$


$


$


Other current liabilities / other liabilities

$
(8,033
)

$
3,229


$
(4,804
)
Currency Option Contracts
Other current assets / other assets
 

 

 

 
Other current liabilities / other liabilities
 
(651
)
 

 
(651
)
Total derivatives not designated as hedging instruments


$


$


$




$
(8,684
)

$
3,229


$
(5,455
)
The following table presents the effect of the effective portion of our derivative financial instruments designated as hedging instruments and their classification within comprehensive income (loss) for the three and six months ended December 31, 2017 and 2016:
Derivatives in Hedging Relationships
Amount of Gain (Loss) Recognized in Comprehensive Income (Loss) on Derivatives
 
Three Months Ended December 31,
 
Six Months Ended December 31,
In thousands
2017
 
2016
 
2017
 
2016
Derivatives in Cash Flow Hedging Relationships
 
 
 
 
 
 
 
Interest rate swaps
$
1,593

 
$
2,513

 
$
1,656

 
$
2,764

Cross-currency swaps
1,566

 
6,731

 
5,074

 
4,711

Derivatives in Net Investment Hedging Relationships
 
 
 
 
 
 
 
Cross-currency swaps
(2,222
)
 
6,883

 
(7,345
)
 
4,824

Currency forward contracts
(3,148
)
 
1,395

 
(9,542
)
 
939

 
$
(2,211
)
 
$
17,522

 
$
(10,157
)
 
$
13,238


15


The following table presents reclassifications out of accumulated other comprehensive loss for the three and six months ended December 31, 2017 and 2016:
Details about Accumulated Other
Comprehensive Loss Components
Amount Reclassified from Accumulated Other Comprehensive Income (Loss) to Net Income
 
Affected line item in the
Statement of Operations
 
Three Months Ended December 31,
 
Six Months Ended December 31,
 
 
In thousands
2017
 
2016
 
2017
 
2016
 
 
Derivatives in Cash Flow Hedging Relationships
 
 
 
 
 
 
 
 
 
Interest rate swaps
$
(164
)
 
$
117

 
$
(106
)
 
$
(38
)
 
Interest expense, net
Cross-currency swaps
(1,688
)
 
8,450

 
(5,435
)
 
7,497

 
Other (expense) income, net
Total before income tax
(1,852
)
 
8,567

 
(5,541
)
 
7,459

 
Income before income taxes
Income tax
482

 
(2,141
)
 
1,407

 
(1,865
)
 
Income tax expense
Total
$
(1,370
)
 
$
6,426

 
$
(4,134
)
 
$
5,594

 
 
The following table presents the adjustment to fair value recorded within the consolidated statements of operations for derivative instruments for which we did not elect hedge accounting, as well as the effect of the ineffective portion and de-designated derivative financial instruments that no longer qualify as hedging instruments in the period:
 
Amount of Gain (Loss) Recognized in Net Income
 
Location of Gain (Loss) Recognized in Income (Ineffective Portion)
 
Three Months Ended December 31,
 
Six Months Ended December 31,
 
 
In thousands
2017
 
2016
 
2017
 
2016
 
 
Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
 
Currency contracts
$
(1,999
)
 
$
13,224

 
$
(10,279
)
 
$
13,301

 
Other (expense) income, net
Interest rate swaps
247

 
253

 
278

 
253

 
Other (expense) income, net
 
$
(1,752
)
 
$
13,477

 
$
(10,001
)
 
$
13,554

 
 
5. Accumulated Other Comprehensive Loss
The following table presents a roll forward of amounts recognized in accumulated other comprehensive loss by component, net of tax of $(1,482) for the six months ended December 31, 2017:

Gains (losses) on cash flow hedges (1)
 
Gains (losses) on pension benefit obligation
 
Translation adjustments, net of hedges (2)
 
Total
Balance as of June 30, 2017
$
(2,250
)
 
$
(357
)
 
$
(110,791
)
 
$
(113,398
)
Other comprehensive income (loss) before reclassifications
6,730

 

 
27,709

 
34,439

Amounts reclassified from accumulated other comprehensive loss to net income
(4,134
)
 

 

 
(4,134
)
Net current period other comprehensive income (loss)
2,596

 

 
27,709

 
30,305

Balance as of December 31, 2017
$
346

 
$
(357
)
 
$
(83,082
)
 
$
(83,093
)
________________________
(1) Gains (losses) on cash flow hedges include our interest rates swap and cross-currency swap contracts designated in cash flow hedging relationships.
(2) As of December 31, 2017 and June 30, 2017, the translation adjustment is inclusive of the effects of our net investment hedges, of which, unrealized losses of $33,935 and $17,048, respectively, net of tax, have been included in accumulated other comprehensive loss.

16


6. Goodwill and Acquired Intangible Assets
Goodwill
The carrying amount of goodwill by reportable segment as of December 31, 2017 and June 30, 2017 is as follows:

Vistaprint

Upload and Print

National Pen
 
All Other Businesses

Total
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 (1)
703

 
15,677

 

 

 
16,380

Balance as of December 31, 2017
$
147,852

 
$
337,482

 
$
34,434

 
$
11,431

 
$
531,199

_________________
(1) Relates to goodwill held by subsidiaries whose functional currency is not the U.S. Dollar.
Acquired Intangible Assets
Acquired intangible assets amortization expense for the three and six months ended December 31, 2017 was $12,558 and $25,191, respectively, compared to $9,879 and $20,092 for the prior comparative periods, respectively. The increase in acquired intangible asset amortization is primarily related to our December 30, 2016 acquisition of National Pen.
7. Other Balance Sheet Components
Accrued expenses included the following:
 
December 31, 2017
 
June 30, 2017
Income and indirect taxes (1)
$
56,255

 
$
34,469

Compensation costs
51,272

 
54,487

Advertising costs
35,774

 
26,641

Shipping costs (1)
12,416

 
6,651

Production costs (1)
11,335

 
7,472

Sales returns
6,085

 
4,474

Interest payable
5,546

 
5,263

Professional costs
3,120

 
3,021

Purchases of property, plant and equipment
1,724

 
3,786

Other
36,180

 
29,303

Total accrued expenses
$
219,707

 
$
175,567

_______________________
(1) The increase in income and indirect taxes, as well as production and shipping costs, is due to increased sales volumes during our peak holiday season in the second quarter of our fiscal year.
Other current liabilities included the following:
 
December 31, 2017
 
June 30, 2017
Contingent earn-out liability
$
47,994

 
$
44,049

Current portion of lease financing obligation
12,569

 
12,569

Short-term derivative liabilities
13,786

 
7,243

Current portion of capital lease obligations
10,998

 
11,573

Mandatorily redeemable noncontrolling interest (1)
1,010

 
901

Other
2,912

 
2,100

Total other current liabilities
$
89,269

 
$
78,435


17


Other liabilities included the following:
 
December 31, 2017
 
June 30, 2017
Long-term derivative liabilities
$
50,651

 
$
31,936

Long-term capital lease obligations
23,004

 
28,306

Mandatorily redeemable noncontrolling interest (1)
2,757

 
2,456

Other (2)
31,472

 
31,985

Total other liabilities
$
107,884

 
$
94,683

_______________________
(1) Relates to the mandatorily redeemable noncontrolling interest of Printi LLC. Refer to Note 11 for additional details.
(2) As of December 31, 2017 and June 30, 2017, other liabilities includes $9,773 and $8,173, respectively, related to share-based compensation awards associated with our investment in Printi LLC. Refer to Note 11 for additional details.
Contingent earn-out liability
Under the original terms of the WIRmachenDRUCK earn-out arrangement, a portion of the earn-out attributed to the minority selling shareholders was included as a component of purchase consideration as of the acquisition date, with any subsequent changes to fair value recognized within general and administrative expense. This earn-out was previously calculated on a sliding scale, based on the achievement of cumulative gross profit against a predetermined target. During the fourth quarter of fiscal 2017, we determined it was reasonably certain, based on recent performance, that the maximum earn-out would be achieved. During the first quarter of fiscal 2018, we amended the terms of this arrangement, to remove the performance condition and we paid the maximum amount of €40,000 on January 2, 2018.
The liability represents the present value of the agreed payment amount. We recognized $947 and $1,774 of expense during the three and six months ended December 31, 2017, respectively, and $6,746 and $22,766 of expense during the prior comparative periods, respectively, as part of general and administrative expense. As of December 31, 2017, the total liability is $47,994, of which $42,052 relates to the majority shareholders and $5,942 relates to the minority shareholders.
8. Debt

December 31, 2017
 
June 30, 2017
Senior secured credit facility
$
425,507

 
$
600,037

7.0% Senior unsecured notes due 2022
275,000

 
275,000

Other
8,053

 
7,541

Debt issuance costs and debt discounts (1)
(8,030
)
 
(5,922
)
Total debt outstanding, net
700,530

 
876,656

Less short-term debt (2)
35,569

 
28,926

Long-term debt
$
664,961

 
$
847,730

_____________________
(1) During the six months ended December 31, 2017, we capitalized $3,251 in debt issuance costs, which related to the amendment and restatement to our senior secured credit facility. Refer below for additional details relating to the amendment.
(2) Balances as of December 31, 2017 and June 30, 2017 are inclusive of short-term debt issuance costs and debt discounts of $1,846 and$1,693, respectively.
Our Debt
Our various debt arrangements described below contain customary representations, warranties and events of default. As of December 31, 2017, we were in compliance with all financial and other covenants related to our debt.

18


Senior Secured Credit Facility
On July 13, 2017, we entered into an amendment and restatement agreement for our senior secured credit facility resulting in an increase of loan commitments under the credit agreement to $1,045,000 in the aggregate. The amendment also extended the tenor of our borrowings to a maturity date of July 13, 2022. As of December 31, 2017, we have a committed credit facility of $1,037,500 as follows:
Revolving loans of $745,000 with a maturity date of July 13, 2022
Term loan of $292,500 amortizing over the loan period, with a final maturity date of July 13, 2022.
Under the terms of our credit agreement, borrowings bear interest at a variable rate of interest based on LIBOR plus 1.50% to 2.25% depending on our leverage ratio, which is the ratio of our consolidated total indebtedness to our consolidated EBITDA, as defined by the credit agreement. As of December 31, 2017, the weighted-average interest rate on outstanding borrowings was 3.77%, inclusive of interest rate swap rates. We are also required to pay a commitment fee on unused balances of 0.225% to 0.400% depending on our leverage ratio. We have pledged the assets and/or share capital of several of our subsidiaries as collateral for our outstanding debt as of December 31, 2017.
Indenture and Senior Unsecured Notes due 2022
On March 24, 2015, we completed a private placement of $275,000 in aggregate principal amount of 7.0% senior unsecured notes due 2022 (the “Notes”). We issued the Notes pursuant to a senior notes indenture dated as of March 24, 2015 among Cimpress N.V., our subsidiary guarantors, and MUFG Union Bank, N.A., as trustee (the "Indenture"). We used the proceeds from the Notes to pay outstanding indebtedness under our unsecured line of credit and our senior secured credit facility and for general corporate purposes.
The Notes bear interest at a rate of 7.0% per annum and mature on April 1, 2022. Interest on the Notes is payable semi-annually on April 1 and October 1 of each year, commencing on October 1, 2015, to the holders of record of the Notes at the close of business on March 15 and September 15, respectively, preceding such interest payment date.

The Notes are senior unsecured obligations and rank equally in right of payment to all our existing and future senior unsecured debt and senior in right of payment to all of our existing and future subordinated debt. The Notes are effectively subordinated to any of our existing and future secured debt to the extent of the value of the assets securing such debt. Subject to certain exceptions, each of our existing and future subsidiaries that is a borrower under or guarantees our senior secured credit facilities will guarantee the Notes.
The Indenture contains various covenants, including covenants that, subject to certain exceptions, limit our and our restricted subsidiaries’ ability to incur and/or guarantee additional debt; pay dividends, repurchase shares or make certain other restricted payments; enter into agreements limiting dividends and certain other restricted payments; prepay, redeem or repurchase subordinated debt; grant liens on assets; enter into sale and leaseback transactions; merge, consolidate or transfer or dispose of substantially all of our consolidated assets; sell, transfer or otherwise dispose of property and assets; and engage in transactions with affiliates.
At any time prior to April 1, 2018, we may redeem some or all of the Notes at a redemption price equal to 100% of the principal amount redeemed, plus a make-whole amount as set forth in the Indenture, plus, in each case, accrued and unpaid interest to, but not including, the redemption date. In addition, at any time prior to April 1, 2018, we may redeem up to 35% of the aggregate outstanding principal amount of the Notes at a redemption price equal to 107% of the principal amount thereof, plus accrued and unpaid interest to, but not including, the redemption date, with the net proceeds of certain equity offerings by Cimpress. At any time on or after April 1, 2018, we may redeem some or all of the Notes at the redemption prices specified in the Indenture, plus accrued and unpaid interest to, but not including, the redemption date.
Other debt
Other debt consists primarily of term loans acquired through our various acquisitions. As of December 31, 2017 and June 30, 2017 we had $8,053 and $7,541, respectively, outstanding for those obligations that are payable through September 2024.

19


9. Income Taxes

Our income tax expense was $21,825 and $15,638 for the three and six months ended December 31, 2017, respectively, as compared to $19,601 and $9,787 for the prior comparative periods. Income tax expense for the three and six months ended December 31, 2017 was higher than the same prior year periods primarily due to an increase in tax expense of $4,701 related to the impacts of U.S. tax reform recognized in the three months ended December 31, 2017. Additionally, during the three and six months ended December 31, 2017, we recognized tax benefits of $1,025 and $1,473, respectively, from share based compensation as compared to $425 and $4,614 for the comparable prior periods. Excluding the effect of these discrete tax items, we are forecasting a more favorable consolidated annual effective tax rate for fiscal 2018 as compared to fiscal 2017 primarily due to higher forecasted full year pre-tax income as well as a more favorable geographical mix of consolidated earnings. In addition, our effective tax rate is negatively impacted by losses in certain jurisdictions where we are unable to recognize a full tax benefit in the current period.
    
On December 22, 2017, the Tax Cuts and Jobs Act ("The Act") was signed into law, resulting in significant changes to U.S. tax law for corporations. One of the most significant changes is a reduction in the U.S. federal corporate tax rate from 35% to 21%, effective January 1, 2018. Since the effective date of the tax rate change is in the middle of our fiscal year, we are required to use a blended U.S. federal tax rate of 28% for fiscal 2018. As a result of The Act, we recognized an increase to our GAAP tax expense of $4,701 related to the re-measurement of deferred tax assets and liabilities during the three months ended December 31, 2017. However, based upon our current interpretations of The Act, we expect the tax reform changes to be net favorable to our fiscal 2018 cash taxes. Our tax balances have been adjusted based upon our interpretation of The Act, although the final impact on our tax balances may change due to the issuance of additional guidance, changes in our interpretation of The Act, changes in assumptions made by Cimpress, and actions Cimpress may take as a result of The Act. We will continue to review and assess the potential impact of any new information on our financial statement positions.
 
On October 1, 2013, we made changes to our corporate entity operating structure, including transferring our intellectual property among certain of our subsidiaries, primarily to align our corporate entities with our evolving operations and business model. Our subsidiary based in Switzerland was the recipient of the intellectual property. In accordance with Swiss tax law, we are entitled to amortize the fair market value of the intellectual property received at the date of transfer over five years for tax purposes. As a result of this amortization, we are expecting a loss for Swiss tax purposes during fiscal 2018.

As of December 31, 2017, we had a liability for unrecognized tax benefits included in the balance sheet of $5,317, including accrued interest and penalties of $391. We recognize interest and, if applicable, penalties related to unrecognized tax benefits in the provision for income taxes. If recognized, the entire liability for unrecognized tax benefits would reduce our income tax expense. It is reasonably possible that a reduction in unrecognized tax benefits may occur within the next twelve months in the range of $500 to $600 related to the lapse of applicable statutes of limitations. We believe we have appropriately provided for all tax uncertainties.
    
We conduct business in a number of tax jurisdictions and, as such, are required to file income tax returns in multiple jurisdictions globally. The years 2014 through 2017 remain open for examination by the United States Internal Revenue Service (“IRS”) and the years 2011 through 2017 remain open for examination in the various states and non-US tax jurisdictions in which we file tax returns. We believe that our income tax reserves are adequately maintained taking into consideration both the technical merits of our tax return positions and ongoing developments in our income tax audits. However, the final determination of our tax return positions, if audited, is uncertain, and there is a possibility that final resolution of these matters could have a material impact on our results of operations or cash flows.
10. Noncontrolling Interests
In certain of our strategic investments we own a controlling equity stake, but a third party owns a minority portion of the equity. The balance sheet and operating activity of these entities are included in our consolidated financial statements and we adjust the net income in our consolidated statement of operations to exclude the noncontrolling interests' proportionate share of results. We present the proportionate share of equity attributable to the redeemable noncontrolling interests as temporary equity within our consolidated balance sheet and the proportionate share of noncontrolling interests not subject to a redemption provision that is outside of our control as equity.

20


Redeemable noncontrolling interests
On April 15, 2015, we acquired 70% of the outstanding shares of Exagroup SAS. The remaining 30% is considered a redeemable noncontrolling equity interest, as it is redeemable in the future and not solely within our control. The Exagroup noncontrolling interest, redeemable at a fixed amount of €39,000, was recorded at its fair value as of the acquisition date and will be adjusted to its redemption value on a periodic basis, if that amount exceeds its carrying value. As of December 31, 2017, the redemption value was less than the carrying value, and therefore no adjustment was required.

On August 23, 2017, we sold approximately 12% of the outstanding shares of our WIRmachenDRUCK subsidiary for a total of €30,000 ($35,390 based on the exchange rate on the date we received the proceeds). The minority equity interest is considered a redeemable noncontrolling interest, as it is redeemable for cash based on future financial results through put and call rights and not solely within our control. The noncontrolling interest was recorded at its fair value as of the sale date and will be adjusted to its redemption value on a periodic basis, with an offset to retained earnings, if that amount exceeds its carrying value. If the formulaic redemption value exceeds the fair value of the noncontrolling interest, then the accretion to redemption value will be offset to the net (income) loss attributable to noncontrolling interest in our consolidated statement of operations. As of December 31, 2017, the redemption value was less than the carrying value, and therefore no adjustment was required.

The following table presents the reconciliation of changes in our noncontrolling interests:
 
 
Redeemable noncontrolling interests
 
Noncontrolling interest
Balance as of June 30, 2017
 
$
45,412

 
$
213

Net income attributable to noncontrolling interest
 
673

 
58

Proceeds from sale of noncontrolling interest
 
35,390

 

Foreign currency translation
 
4,003

 

Balance as of December 31, 2017
 
$
85,478

 
$
271


11. Variable Interest Entity ("VIE")
On August 7, 2014, we made a capital investment in Printi LLC, which operates in Brazil. This investment provided us access to a new market and the opportunity to drive longer-term growth in Brazil and other geographies as Printi expands internationally in the future. As of December 31, 2017, we have a 49.99% equity interest in Printi. Based upon the level of equity investment at risk, Printi is considered a variable interest entity. The shareholders of Printi share profits and voting control on a pro-rata basis. While we do not manage the day to day operations of Printi, we do have the unilateral ability to exercise participating voting rights for specific transactions, and as such no one shareholder is considered to be the primary beneficiary. However, certain significant shareholders cannot transfer their equity interests without our approval and as a result are considered de facto agents on our behalf in accordance with ASC 810-10-25-43.
In aggregating our rights, as well as those of our de facto agents, the group as a whole has the power to direct the activities that most significantly impact the entity's economic performance, the obligation to absorb losses and the right to receive benefits from the entity. In situations where a de facto agency relationship is present, one party is required to be identified as the primary beneficiary, and the evaluation requires significant judgment. The factors considered include the presence of a principal/agent relationship, the relationship and significance of activities to the reporting entity, the variability associated with the VIE's anticipated economics and the design of the VIE. The analysis is qualitative in nature and is based on weighting the relative importance of each of the factors in relation to the specifics of the VIE arrangement. Upon our investment we performed an analysis and concluded that we are the party that is most closely associated with Printi, as we are most exposed to the variability of the economics and therefore considered the primary beneficiary.
We will purchase an additional 3.7% non-voting economic interest during the fourth quarter of fiscal 2018. In addition, we will acquire the remaining equity interest in Printi through a reciprocal put and call structure, exercisable from March 31, 2021 through a mandatory redemption date of July 31, 2023. As the remaining equity interests are mandatorily redeemable by all parties no later than a specified future date, the noncontrolling interest is within the scope of ASC 480 and is required to be presented as a liability on our consolidated balance sheet. We adjust the liability to its estimated redemption value each reporting period and recognize any changes within interest expense, net in our consolidated statement of operations.

21


We also have liability-based awards for Printi restricted stock held by Printi employees that are fully vested and marked to fair value each reporting period until cash settlement. As of December 31, 2017, through the use of an option pricing model we estimate the current fair value of the restricted stock to be $9,773 and we have recognized $1,007 and $1,047 in general and administrative expense for the three and six months ended December 31, 2017, respectively, compared to $398 and $784 in the prior comparative periods.
We also have an arrangement to lend two Printi equity holders up to $24,000 that is payable on the date the put or call option is exercised, which will occur no later than July 31, 2023. As of December 31, 2017, the long-term loan receivable, including accrued interest, is $12,493 and classified within other assets in our consolidated balance sheets. We did not have a long-term loan receivable as of June 30, 2017. The loans carry 8.5% annual interest, and are not contingent upon continued employment. We expect that the loan proceeds will be used to offset our purchase of the remaining noncontrolling interest in the future.
12. Segment Information
Our operating segments are based upon the manner in which our operations are managed and the availability of separate financial information reported internally to the Chief Executive Officer, who is our Chief Operating Decision Maker (“CODM”) for purposes of making decisions about how to allocate resources and assess performance. As of December 31, 2017 we have numerous operating segments under our management reporting structure which are reported in the following four reportable segments:
Vistaprint - Includes the operations of our Vistaprint websites focused on the North America, Europe, Australia and New Zealand markets, and our Webs-branded business, which is managed with the Vistaprint-branded digital business in the previously listed geographies.
Upload and Print - Includes the results of our druck.at, Easyflyer, Exagroup, Pixartprinting, Printdeal, Tradeprint, and WIRmachenDRUCK businesses.
National Pen - Includes the global operations of our National Pen businesses, which manufacture and market custom writing instruments and promotional products, apparel and gifts.
All Other Businesses - Includes the operations of our Most of World and Corporate Solutions businesses. Most of World consists of our businesses in Brazil, China, India and Japan. In Japan and India, we primarily operate under close derivatives of the Vistaprint business model and technology, albeit with decentralized, locally-managed cross-functional operations in each country, and with product, content and service offerings which we tailor to the Japanese and Indian markets. Our Corporate Solutions business serves medium-sized businesses and larger corporations, as well as our legacy business with retail partners and franchise businesses, primarily through the "Vistaprint Corporate" brand. Our All Other Businesses segment also includes Albumprinter results through the divestiture date of August 31, 2017.
Central and corporate costs consists primarily of the team of software engineers that is building our mass customization platform, shared service organizations such as global procurement, technology services such as hosting and security, and administrative costs of our Cimpress India offices where numerous Cimpress businesses have dedicated business-specific team members, and corporate functions including our Supervisory Board, CEO, and the team members necessary for managing corporate activities, such as treasury, tax, capital allocation, financial consolidation, and legal. These costs also include certain unallocated share-based compensation costs.
During the first quarter of fiscal 2018, we began presenting inter-segment fulfillment activity as revenue for the fulfilling business unit for purposes of measuring and reporting our segment financial performance. Any historical inter-segment fulfillment transactions were previously recognized as cost relief for the fulfilling business unit in our presentation to the CODM. We now recognize these transactions as inter-segment revenue for presentation to the CODM; for example, a third-party customer order received by our Corporate Solutions business that is fulfilled at one of our Vistaprint production facilities is recognized as inter-segment revenue for our Vistaprint business based on pricing and terms agreed upon between segment management. Inter-segment revenues are recognized only for transactions between our reportable segments and do not include any transactions between businesses within a reportable segment, which are eliminated within each reportable segment. Intercompany revenues are eliminated in our consolidated results.

22


As part of these changes, we also recast historical segment results to ensure the consistent application of our current inter-segment revenue presentation. For the three and six months ended December 31, 2016, we increased revenue for our Vistaprint business by $1,407 and $2,520, with a corresponding increase to inter-segment eliminations. We also recast historical segment profitability for the allocation of certain IT costs, which previously burdened our Vistaprint business, but have now been allocated to each of our businesses in fiscal 2018. For the three and six months ended December 31, 2016, the cost allocation change resulted in an increase to Vistaprint segment profit by $624 and $1,247, respectively, with a corresponding decrease to segment profit for Upload and Print of $161 and $322, respectively, and All Other Businesses of $140 and $280, respectively, and an increase to our Central and corporate cost center of $323 and $646, respectively.
For awards granted under our 2016 Performance Equity Plan, the PSU expense value is based on a Monte Carlo fair value analysis and is required to be expensed on an accelerated basis. In order to ensure comparability in measuring our businesses results, we allocate the straight-line portion of the fixed grant value to our businesses. Any expense in excess of the amount as a result of the fair value measurement of the PSUs and the accelerated expense profile of the awards is recognized within Central and corporate costs.
Segment profit (loss) is the primary profitability metric by which our CODM measures segment financial performance and allocates resources. Certain items are excluded from segment profit (loss), such as acquisition-related amortization and depreciation, expense recognized for contingent earn-out related charges, including the changes in fair value of contingent consideration and compensation expense related to cash-based earn-out mechanisms dependent upon continued employment, share-based compensation related to investment consideration, certain impairment expense, and restructuring charges. A portion of the interest expense associated with our Waltham lease is included as expense in segment profit (loss) and allocated based on headcount to the appropriate business or corporate and global function. The interest expense represents a portion of the cash rent payment and is considered an operating expense for purposes of measuring our segment performance. We do not allocate non-operating income to our segment results.
Our All Other Businesses reportable segment includes our Most of World and Corporate Solutions businesses that have operating losses as they are in the early stage of investment relative to the scale of the underlying businesses, which may limit its comparability to other segments regarding profit (loss).
Our balance sheet information is not presented to the CODM on an allocated basis, and therefore we do not present asset information by segment. We do present other segment information to the CODM, which includes purchases of property, plant and equipment and capitalization of software and website development costs, and therefore include that information in the tables below.
Revenue by segment is based on the business-specific websites or sales channel through which the customer’s order was transacted. The following tables set forth revenue, segment profit (loss), total income from operations and total income before income taxes.
 
Three Months Ended December 31,
 
Six Months Ended December 31,
 
2017
 
2016
 
2017
 
2016
Revenue:
 
 
 
 
 
 
 
Vistaprint (1)
$
428,908

 
$
380,821

 
$
747,951

 
$
667,356

Upload and Print (2)
192,527

 
152,388

 
352,917

 
284,345

National Pen (3)
126,098

 

 
185,815

 

All Other Businesses (4)
20,994

 
45,049

 
49,048

 
71,383

Total segment revenue
768,527

 
578,258

 
1,335,731

 
1,023,084

Inter-segment eliminations
(6,473
)
 
(1,407
)
 
(10,393
)
 
(2,520
)
Total consolidated revenue
$
762,054

 
$
576,851

 
$
1,325,338

 
$
1,020,564

_____________________
(1) Vistaprint segment revenues include inter-segment revenue of $2,803 and $5,006 for the three and six months ended December 31, 2017, respectively, and $1,407 and $2,520 for the prior comparative periods, respectively.
(2) Upload and Print segment revenues include inter-segment revenue of $480 and $808 for the three and six months ended December 31, 2017, respectively. No inter-segment revenue was recognized in the prior comparable periods.
(3) National Pen segment revenues include inter-segment revenue of $1,024 and $1,470 for the three and six months ended December 31, 2017, respectively. No inter-segment revenue was recognized in the prior comparable periods.
(4) All Other Businesses segment revenues include inter-segment revenue of $2,166 and $3,109 for the three and six months ended December 31, 2017, respectively. No inter-segment revenue was recognized in the prior comparable periods.

23


 
Three Months Ended December 31,
 
Six Months Ended December 31,
 
2017
 
2016
 
2017
 
2016
Segment profit (loss):
 
 
 
 


 


Vistaprint
$
99,049

 
$
67,016

 
$
129,944

 
$
92,288

Upload and Print
22,470

 
16,798

 
37,238

 
30,249

National Pen
17,645

 

 
18,830

 

All Other Businesses
(8,566
)
 
(2,107
)
 
(16,117
)
 
(11,859
)
Total segment profit
130,598

 
81,707

 
169,895

 
110,678

Central and corporate costs
(33,410
)

(31,228
)
 
(61,667
)
 
(59,414
)
Acquisition-related amortization and depreciation
(12,613
)
 
(10,019
)
 
(25,300
)
 
(20,232
)
Earn-out related charges (1)
(1,254
)
 
(7,010
)
 
(2,391
)
 
(23,257
)
Share-based compensation related to investment consideration
(1,007
)
 
(601
)
 
(1,047
)
 
(4,704
)
Restructuring-related charges
(11,501
)
 
(1,100
)
 
(12,355
)
 
(1,100
)
Interest expense for Waltham, MA lease
1,896

 
1,956

 
3,807

 
3,926

Gain on the purchase or sale of subsidiaries (2)

 

 
48,380

 

Total income from operations
72,709

 
33,705

 
119,322

 
5,897

Other (expense) income, net
(7,732
)
 
30,549

 
(24,044
)
 
28,417

Interest expense, net
(12,529
)
 
(9,631
)
 
(25,611
)
 
(19,535
)
Income before income taxes
$
52,448

 
$
54,623

 
$
69,667

 
$
14,779

___________________
(1) Includes expense recognized for the change in fair value of contingent consideration and compensation expense related to cash-based earn-out mechanisms dependent upon continued employment.
(2) Includes the impact of the gain on the sale of Albumprinter, as well as a bargain purchase gain as defined by ASC 805-30 for an acquisition in which the identifiable assets acquired and liabilities assumed are greater than the consideration transferred, that was recognized in general and administrative expense in our consolidated statement of operations during the six months ended December 31, 2017.
 
Three Months Ended December 31,
 
Six Months Ended December 31,
 
2017
 
2016
 
2017
 
2016
Depreciation and amortization:
 
 
 
 
 
 
 
Vistaprint
$
15,709

 
$
16,128

 
$
32,483

 
$
30,899

Upload and Print
15,005

 
13,567

 
29,725

 
28,032

National Pen
5,275

 

 
10,370

 

All Other Businesses
2,156

 
3,730

 
4,443

 
7,334

Central and corporate costs
3,154

 
3,552

 
6,662

 
6,117

Total depreciation and amortization
$
41,299

 
$
36,977

 
$
83,683

 
$
72,382


 
Three Months Ended December 31,
 
Six Months Ended December 31,
 
2017
 
2016
 
2017
 
2016
Purchases of property, plant and equipment:
 
 
 
 
 
 
 
Vistaprint
$
10,835

 
$
8,335

 
$
24,499

 
$
19,544

Upload and Print
5,733

 
3,184

 
8,991

 
7,984

National Pen
1,219

 

 
3,708

 

All Other Businesses
308

 
3,874

 
979

 
6,513

Central and corporate costs
122

 
1,548

 
497

 
2,219

Total purchases of property, plant and equipment
$
18,217

 
$
16,941

 
$
38,674

 
$
36,260


24


 
Three Months Ended December 31,
 
Six Months Ended December 31,
 
2017
 
2016
 
2017
 
2016
Capitalization of software and website development costs:
 
 
 
 
 
 
 
Vistaprint
$
5,507

 
$
5,528

 
$
11,080

 
$
8,662

Upload and Print
1,016

 
669

 
1,790

 
1,113

National Pen
367

 

 
367

 

All Other Businesses
400

 
637

 
1,368

 
1,905

Central and corporate costs
1,890

 
3,964

 
3,509

 
7,430

Total capitalization of software and website development costs
$
9,180

 
$
10,798

 
$
18,114

 
$
19,110

The following tables set forth long-lived assets by geographic area:
 
December 31, 2017
 
June 30, 2017
Long-lived assets (1):
 

 
 

Netherlands
$
96,648

 
$
83,223

Canada
86,096

 
85,926

Switzerland
49,852

 
49,017

Italy
44,328

 
44,423

United States
37,046

 
64,034

Australia
23,610

 
22,961

France
22,200

 
22,794

Jamaica
21,503

 
21,492

Japan
20,302

 
20,686

Other
72,007

 
64,377

Total
$
473,592

 
$
478,933

___________________
(1) Excludes goodwill of $531,199 and $514,963, intangible assets, net of $258,657 and $275,924, the Waltham lease asset of $113,985 and $116,045, and deferred tax assets of $66,022 and $48,004 as of December 31, 2017 and June 30, 2017, respectively.
13. Commitments and Contingencies
Lease Commitments
We have commitments under operating leases for our facilities that expire on various dates through 2026, including the Waltham lease arrangement discussed in Note 2. Total lease expense, net of suble