Document



 

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 March 31, 2019
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.) 
Building D, Xerox Technology Park
Dundalk, Co. Louth
Ireland
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code: 353 42 938 8500
_________________________________

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 every Interactive Data File required to be submitted 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 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
 
 
 
 
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
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
 
Trading Symbol(s)
 
Name of Exchange on Which Registered
Ordinary Shares, par value of €0.01
 
CMPR
 
NASDAQ Global Select Market
As of April 29, 2019, there were 30,705,206 Cimpress N.V. ordinary shares outstanding.

 



CIMPRESS N.V.
QUARTERLY REPORT ON FORM 10-Q
For the Three and Nine Months Ended March 31, 2019

TABLE OF CONTENTS
 
 
Page
PART I FINANCIAL INFORMATION
 
Item 1. Financial Statements (unaudited)
     Consolidated Balance Sheets as of March 31, 2019 and June 30, 2018
     Consolidated Statements of Operations for the three and nine months ended March 31, 2019 and 2018
Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended March 31, 2019 and 2018
     Consolidated Statements of Shareholders' Equity for the nine months ended March 31, 2019 and 2018
     Consolidated Statements of Cash Flows for the nine months ended March 31, 2019 and 2018
     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)


March 31,
2019

June 30,
2018
Assets
 


 

Current assets:
 


 

Cash and cash equivalents
$
44,258


$
44,227

Accounts receivable, net of allowances of $7,236 and $6,898, respectively
70,095


55,621

Inventory
67,203


60,602

Prepaid expenses and other current assets
92,048


78,846

Total current assets
273,604


239,296

Property, plant and equipment, net
498,324


483,664

Software and website development costs, net
64,882


56,199

Deferred tax assets
57,885


67,087

Goodwill
720,734


520,843

Intangible assets, net
273,831


230,201

Other assets
32,022


54,927

Total assets
$
1,921,282


$
1,652,217

Liabilities, noncontrolling interests and shareholders’ equity
 


 

Current liabilities:
 


 

Accounts payable
$
167,611


$
152,436

Accrued expenses
207,918


186,661

Deferred revenue
34,941


27,697

Short-term debt
64,516

 
59,259

Other current liabilities
42,866

 
54,971

Total current liabilities
517,852


481,024

Deferred tax liabilities
45,656


51,243

Lease financing obligation
111,956

 
102,743

Long-term debt
1,010,599


767,585

Other liabilities
53,916


69,524

Total liabilities
1,739,979


1,472,119

Commitments and contingencies (Note 14)
 
 
 
Redeemable noncontrolling interests
52,366


86,151

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 30,704,788 and 30,876,193 shares outstanding, respectively
615


615

Treasury shares, at cost, 13,375,839 and 13,204,434 shares, respectively
(708,140
)

(685,577
)
Additional paid-in capital
403,989


395,682

Retained earnings
503,275


452,756

Accumulated other comprehensive loss
(70,802
)

(69,814
)
Total shareholders’ equity attributable to Cimpress N.V.
128,937


93,662

Noncontrolling interests

 
285

Total shareholders' equity
128,937

 
93,947

Total liabilities, noncontrolling interests and shareholders’ equity
$
1,921,282


$
1,652,217


See accompanying notes.

1


CIMPRESS N.V.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited in thousands, except share and per share data)
 
Three Months Ended March 31,
 
Nine Months Ended March 31,
 
2019
 
2018
 
2019
 
2018
Revenue
$
661,814

 
$
636,069

 
$
2,076,362

 
$
1,961,407

Cost of revenue (1)
342,700

 
319,209

 
1,056,667

 
963,249

Technology and development expense (1)
58,274

 
61,267

 
170,742

 
182,598

Marketing and selling expense (1)
171,584

 
179,591

 
566,335

 
546,469

General and administrative expense (1)
37,753

 
44,103

 
119,145

 
127,869

Amortization of acquired intangible assets
14,022

 
12,941

 
40,169

 
38,132

Restructuring expense (1)
7,866

 
2,331

 
9,062

 
14,686

(Gain) on sale of subsidiaries

 

 

 
(47,545
)
Income from operations
29,615

 
16,627

 
114,242

 
135,949

Other (expense) income, net
(2,495
)
 
(1,558
)
 
17,386

 
(25,602
)
Interest expense, net
(16,787
)
 
(12,652
)
 
(47,372
)
 
(38,263
)
Income before income taxes
10,333

 
2,417

 
84,256

 
72,084

Income tax expense
4,091

 
4,019

 
23,971

 
19,657

Net income (loss)
6,242

 
(1,602
)
 
60,285

 
52,427

Add: Net loss (income) attributable to noncontrolling interest
288

 
(663
)
 
620

 
(1,394
)
Net income (loss) attributable to Cimpress N.V.
$
6,530

 
$
(2,265
)
 
$
60,905

 
$
51,033

Basic net income (loss) per share attributable to Cimpress N.V.
$
0.21

 
$
(0.07
)
 
$
1.98

 
$
1.65

Diluted net income (loss) per share attributable to Cimpress N.V.
$
0.21

 
$
(0.07
)
 
$
1.92

 
$
1.58

Weighted average shares outstanding — basic
30,763,055

 
30,724,018

 
30,837,207

 
30,992,066

Weighted average shares outstanding — diluted
31,514,793

 
30,724,018

 
31,781,141

 
32,276,520

____________________________________________
(1) Share-based compensation is allocated as follows:
 
Three Months Ended March 31,
 
Nine Months Ended March 31,
 
2019
 
2018
 
2019
 
2018
Cost of revenue
$
42

 
$
105

 
$
320

 
$
240

Technology and development expense
1,320

 
3,242

 
2,000

 
7,916

Marketing and selling expense
1,187

 
2,138

 
673

 
4,981

General and administrative expense
1,955

 
7,289

 
7,707

 
19,254

Restructuring expense
3,250

 
718

 
3,250

 
1,327


See accompanying notes.

2


CIMPRESS N.V.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited in thousands)
 
Three Months Ended March 31,
 
Nine Months Ended March 31,
 
2019
 
2018
 
2019
 
2018
Net income (loss)
$
6,242

 
$
(1,602
)
 
$
60,285

 
$
52,427

Other comprehensive income (loss), net of tax:

 

 
 
 
 
Foreign currency translation gains (losses), net of hedges
3,802

 
(8,799
)
 
3,720

 
30,335

Net unrealized (losses) gains on derivative instruments designated and qualifying as cash flow hedges
(7,375
)
 
8,408

 
(13,572
)
 
15,138

Amounts reclassified from accumulated other comprehensive loss (income) to net income (loss) on derivative instruments
1,374

 
(2,416
)

4,361

 
(6,550
)
Comprehensive income (loss)
4,043

 
(4,409
)
 
54,794

 
91,350

Add: Comprehensive loss (income) attributable to noncontrolling interests
1,005

 
(2,343
)
 
5,121

 
(7,077
)
Total comprehensive income (loss) attributable to Cimpress N.V.
$
5,048

 
$
(6,752
)
 
$
59,915

 
$
84,273

See accompanying notes.

3



CIMPRESS N.V.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(unaudited in thousands)
 
Ordinary Shares
 
Treasury Shares
 
 
 
 
 
 
 
 
 
Number of
Shares
Issued
 
Amount
 
Number
of
Shares
 
Amount
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated Other
Comprehensive
Loss
 
Total
Shareholders’
Equity
Balance at June 30, 2018
44,080


$
615


(13,206
)

$
(685,577
)

$
395,682


$
452,756


$
(69,814
)

$
93,662

Restricted share units vested, net of shares withheld for taxes

 

 
20

 
64

 
(1,533
)
 

 

 
(1,469
)
Grant of restricted share awards

 

 
(2
)
 
(288
)
 

 

 

 
(288
)
Share-based compensation expense

 

 

 

 
8,856

 

 

 
8,856

Net loss attributable to Cimpress N.V.

 

 

 

 

 
(14,639
)
 

 
(14,639
)
Adoption of new accounting standard

 

 

 

 

 
(3,246
)
 

 
(3,246
)
Net unrealized gain on derivative instruments designated and qualifying as cash flow hedges

 

 

 

 

 

 
1,413

 
1,413

Foreign currency translation, net of hedges

 

 

 

 

 

 
(2,185
)
 
(2,185
)
Balance at September 30, 2018
44,080

 
$
615

 
(13,188
)
 
$
(685,801
)
 
$
403,005

 
$
434,871

 
$
(70,586
)
 
$
82,104

Issuance of ordinary shares due to share option exercises, net of shares withheld for taxes




55


2,887


(445
)





2,442

Restricted share units vested, net of shares withheld for taxes




7


146


(506
)





(360
)
Grant of restricted share awards




6


312








312

Share-based compensation expense








(5,997
)





(5,997
)
Purchase of ordinary shares




(118
)

(14,043
)







(14,043
)
Net income attributable to Cimpress N.V.










69,014




69,014

Adjustment to noncontrolling interest for share forfeiture








591






591

Noncontrolling interest accretion to redemption value










(7,140
)



(7,140
)
Net unrealized loss on derivative instruments designated and qualifying as cash flow hedges












(4,623
)

(4,623
)
Foreign currency translation, net of hedges












5,887


5,887

Balance at December 31, 2018
44,080


$
615


(13,238
)

$
(696,499
)

$
396,648


$
496,745


$
(69,322
)

$
128,187

Issuance of ordinary shares due to share option exercises, net of shares withheld for taxes




4


210


107






317

Restricted share units vested, net of shares withheld for taxes




7


223


(520
)





(297
)
Share-based compensation expense








7,754






7,754

Purchase of ordinary shares




(149
)

(12,074
)







(12,074
)
Net income attributable to Cimpress N.V.










6,530




6,530

Net unrealized loss on derivative instruments designated and qualifying as cash flow hedges












(6,001
)

(6,001
)
Foreign currency translation, net of hedges












4,521


4,521

Balance at March 31, 2019
44,080


$
615


(13,376
)

$
(708,140
)

$
403,989


$
503,275


$
(70,802
)

$
128,937

See accompanying notes.

4



CIMPRESS N.V.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (CONTINUED)
(unaudited in thousands)
 
Ordinary Shares
 
Treasury Shares
 
 
 
 
 
 
 
 
 
Number of
Shares
Issued
 
Amount
 
Number
of
Shares
 
Amount
 
Additional
Paid-in
Capital
 
Retained
Earnings
 
Accumulated Other
Comprehensive
Loss
 
Total
Shareholders’
Equity
Balance at June 30, 2017
44,080


$
615


(12,665
)

$
(588,365
)

$
361,376


$
414,771


$
(113,398
)

$
74,999

Issuance of ordinary shares due to share option exercises, net of shares withheld for taxes




34


1,581


119






1,700

Restricted share units vested, net of shares withheld for taxes




25


624


(1,812
)





(1,188
)
Grant of restricted share awards




(2
)

(168
)







(168
)
Share-based compensation expense








7,001






7,001

Purchase of ordinary shares




(453
)

(40,674
)







(40,674
)
Net income attributable to Cimpress N.V.










23,366




23,366

Adoption of new accounting standard










(5,864
)



(5,864
)
Net unrealized gain on derivative instruments designated and qualifying as cash flow hedges












807


807

Foreign currency translation, net of hedges












24,266


24,266

Balance at September 30, 2017
44,080


$
615


(13,061
)

$
(627,002
)

$
366,684


$
432,273


$
(88,325
)

$
84,245

Issuance of ordinary shares due to share option exercises, net of shares withheld for taxes




59


2,828


120






2,948

Restricted share units vested, net of shares withheld for taxes




15


225


(1,133
)





(908
)
Share-based compensation expense








12,450






12,450

Purchase of ordinary shares




(121
)

(14,465
)







(14,465
)
Net income attributable to Cimpress N.V.










29,932




29,932

Net unrealized gain on derivative instruments designated and qualifying as cash flow hedges












1,789


1,789

Foreign currency translation, net of hedges












3,443


3,443

Balance at December 31, 2017
44,080


$
615


(13,108
)

$
(638,414
)

$
378,121


$
462,205


$
(83,093
)

$
119,434

Issuance of ordinary shares due to share option exercises, net of shares withheld for taxes




50


2,505


(8
)





2,497

Restricted share units vested, net of shares withheld for taxes




12


(56
)

(954
)





(1,010
)
Share-based compensation expense








13,599






13,599

Purchase of ordinary shares




(321
)

(39,571
)







(39,571
)
Net loss attributable to Cimpress N.V.










(2,265
)



(2,265
)
Net unrealized gain on derivative instruments designated and qualifying as cash flow hedges












3,676


3,676

Foreign currency translation, net of hedges












(3,059
)

(3,059
)
Balance at March 31, 2018
44,080


$
615


(13,367
)

$
(675,536
)

$
390,758


$
459,940


$
(82,476
)

$
93,301

See accompanying notes.

5

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





Nine Months Ended March 31,
 
2019

2018
Operating activities
 


 

Net income
$
60,285


$
52,427

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


 

Depreciation and amortization
129,554


127,120

Share-based compensation expense
13,950


33,718

Deferred taxes
9,013


(9,552
)
Gain on sale of subsidiaries

 
(47,545
)
Change in contingent earn-out liability

 
1,774

Unrealized (gain) loss on derivatives not designated as hedging instruments included in net income
(5,932
)

9,246

Effect of exchange rate changes on monetary assets and liabilities denominated in non-functional currency
1,276


5,211

Payments of contingent consideration in excess of acquisition date fair value

 
(4,639
)
Other non-cash items
4,742


2,129

Changes in operating assets and liabilities:
 


 

Accounts receivable
(13,812
)

(14,696
)
Inventory
(9,077
)

(12,104
)
Prepaid expenses and other assets
(5,318
)

136

Accounts payable
12,407


18,448

Accrued expenses and other liabilities
25,382


(17,040
)
Net cash provided by operating activities
222,470


144,633

Investing activities
 


 

Purchases of property, plant and equipment
(57,934
)
 
(47,441
)
Proceeds from the sale of subsidiaries, net of transaction costs and cash divested


93,779

Business acquisitions, net of cash acquired
(289,920
)
 
(110
)
Purchases of intangible assets
(22
)
 
(308
)
Capitalization of software and website development costs
(34,637
)
 
(29,476
)
Proceeds from the sale of assets
550


485

Other investing activities
409

 
(2,950
)
Net cash (used in) provided by investing activities
(381,554
)

13,979

Financing activities
 
 
 
Proceeds from borrowings of debt
926,378

 
590,508

Payments of debt
(681,032
)
 
(656,153
)
Payments of debt issuance costs
(2,729
)
 
(3,251
)
Payments of purchase consideration included in acquisition-date fair value

 
(2,022
)
Payments of withholding taxes in connection with equity awards
(2,402
)
 
(3,080
)
Payments of capital lease obligations
(12,722
)
 
(13,779
)
Purchase of ordinary shares
(26,117
)
 
(94,710
)
Purchase of noncontrolling interests
(41,177
)
 

Proceeds from sale of noncontrolling interest

 
35,390

Distribution to noncontrolling interest
(3,375
)
 

Proceeds from issuance of ordinary shares
2,757

 
11,516

Issuance of loans

 
(16,500
)
Other financing activities
2,319

 
(83
)
Net cash provided by (used in) financing activities
161,900

 
(152,164
)
Effect of exchange rate changes on cash
(2,785
)
 
5,691

Change in cash held for sale

 
12,042

Net increase in cash and cash equivalents
31

 
24,181

Cash and cash equivalents at beginning of period
44,227

 
25,697

Cash and cash equivalents at end of period
$
44,258

 
$
49,878

See accompanying notes.

6


CIMPRESS N.V.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(unaudited in thousands)
 
Nine Months Ended March 31,
 
2019
 
2018
Supplemental disclosures of cash flow information:
 
 
 
Cash paid during the period for:
 
 
 
Interest
$
39,887

 
$
33,856

Income taxes
16,123

 
17,888

Non-cash investing and financing activities:
 
 
 
Capitalization of construction costs related to financing lease obligation
$
12,272

 
$

Property and equipment acquired under capital leases
11,620

 
531

Amounts accrued related to business acquisitions
5,564

 
3,864

See accompanying notes.

7


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

1. Description of the Business
Cimpress is a strategically focused group of more than a dozen businesses that specialize in mass customization, via which we deliver large volumes of individually small-sized customized orders for a broad spectrum of print, signage, photo merchandise, invitations and announcements, writing instruments, packaging, apparel and other categories. We invest in and build customer-focused, entrepreneurial mass customization businesses for the long term, which we manage in a decentralized, autonomous manner. Mass customization is a core element of the business model of each Cimpress business. We drive competitive advantage across Cimpress through a select few shared strategic capabilities that have the greatest potential to create Cimpress-wide value. We limit all other central activities to only those which absolutely must be performed centrally.
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. Investments in entities in which we cannot exercise significant influence, and the related equity securities do not have a readily determinable fair value, are accounted for using the cost method and are included in other assets on the consolidated balance sheets.

Operating results for the three and nine months ended March 31, 2019 are not necessarily indicative of the results that may be expected for the year ending June 30, 2019 or for any other period. The consolidated balance sheet at June 30, 2018 has been derived from our audited consolidated financial statements at that date but does not include all of the information and notes required by GAAP for complete financial statements. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended June 30, 2018 included in our Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (the “SEC”).
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We believe our most significant estimates are associated with the ongoing evaluation of the recoverability of our long-lived assets and goodwill, estimated useful lives of assets, share-based compensation, accounting for business combinations, and income taxes and related valuation allowances, among others. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results could differ from those estimates.
Revenue Recognition
Revenue Recognition - Adoption of ASC 606
On July 1, 2018, we adopted ASC 606, Revenue from Contracts with Customers, using the modified retrospective transition approach. Under the modified retrospective approach, we applied the new standard for any contracts that were not complete as of the adoption date and recognized any cumulative impacts as of the adoption date within retained earnings on our consolidated balance sheet. We did not adjust the prior comparable period.

8


The following table summarizes the cumulative effect of adopting the new revenue standard as of the adoption date of July 1, 2018:
Consolidated Balance Sheet
As reported at
June 30, 2018
 
ASC 606 adjustments
 
Adjusted balance at
July 1, 2018
Assets


 


 


Prepaid expenses and other current assets
$
78,846

 
$
(3,738
)
 
$
75,108

Deferred tax assets
67,087

 
595

 
67,682

Liabilities and Shareholders' Equity


 


 


Deferred revenue
$
27,697

 
$
103

 
$
27,800

Retained earnings
452,756

 
(3,246
)
 
449,510

The following table summarizes the impact as of and for the three and nine months ended March 31, 2019 from adopting the new revenue standard as compared to the previous revenue standard:

As reported
(current revenue standard)
 
Current period adjustments
 
As adjusted
(previous revenue standard)
Consolidated Statement of Operations for the Three Months Ended March 31, 2019


 


 


Marketing and selling expense (1)
$
171,584

 
$
1,486

 
$
173,070

Income tax expense
4,091

 
(83
)
 
4,008

Net income
6,242

 
(1,403
)
 
4,839

Consolidated Statement of Operations for the Nine Months Ended March 31, 2019
 
 
 
 
 
Marketing and selling expense (1)
$
566,335

 
$
(486
)
 
$
565,849

Income tax expense
23,971

 
86

 
24,057

Net income
60,285

 
400

 
60,685

Consolidated Balance Sheet as of March 31, 2019
 
 
 
 
 
Assets
 
 
 
 
 
Prepaid expenses and other current assets
$
92,048

 
$
4,224

 
$
96,272

Deferred tax assets
57,885

 
(121
)
 
57,764

Liabilities and Shareholders' Equity
 
 
 
 
 
Accrued expenses
$
207,918

 
$
35

 
$
207,953

Deferred revenue
34,941

 
(103
)
 
34,838

Retained earnings
503,275

 
4,171

 
507,446

_____________________
(1) During the three and nine months ended March 31, 2019, the adjustment to marketing and selling expense was the impact from National Pen's direct mail costs that resulted in lower expense of $1,486 and higher expense of $486, respectively. The timing of the expense recognition would have been different under the previous revenue standard since they would have been capitalized within prepaid expense and other current assets and amortized over the customer response period to marketing and selling expense. As of July 1, 2018, we recognized a cumulative effect adjustment within retained earnings of $3,738.
The material impact of our adoption of ASC 606 is related to the timing for recognizing direct-response advertising costs, which were costs previously capitalized and expensed based on the guidance outlined in ASC 340 - "Other Assets and Deferred Assets". The guidance included in ASC 340 is eliminated by ASC 606, and under the new revenue standard these costs are expensed as incurred because they do not meet the requirements for capitalization since they are not direct and incremental to obtaining a contract. Historically the direct mail costs were capitalized and amortized over the customer response period (typically 3-4 months) and now costs are recognized when the direct mail is sent to the customers. This creates volatility in our quarterly profitability but should not have a significant impact on an annual basis and has no impact on cash flow. By applying the modified retrospective approach for implementing the standard, we adjusted the cumulative impact of capitalized costs of $3,738, resulting in a decrease to prepaid expenses and other current assets and a decrease to retained earnings, as well as the related tax impact of $595, resulting in an increase to deferred tax assets and an increase to retained earnings on July 1, 2018.

9


We also identified an impact related to customer loyalty programs that are offered by several of our businesses. Under the new revenue standard, the rewards associated with these programs are recognized as an additional performance obligation, resulting in an allocation of the transaction price and deferral of revenue until the subsequent reward redemption. By applying the modified retrospective approach for implementing the standard, we adjusted the cumulative impact of $103, resulting in an increase to deferred revenue and a decrease to retained earnings on July 1, 2018. All other impacts during the current periods were not considered material.
Revenue Recognition Policy
We generate revenue primarily from the sale and shipment of customized manufactured products. To a much lesser extent (and only in our Vistaprint business) we provide digital services, website design and hosting, and email marketing services, as well as a small percentage from order referral fees and other third-party offerings. Revenues are recognized when control of the promised products or services is transferred to the customer in an amount that reflects the consideration we expect to be entitled to in exchange for those products or services. Shipping revenues are recognized when control of the related products is transferred to the customer.
We recognize revenue upon shipment of the fulfilled orders, which generally occurs upon delivery to the shipping carrier, but certain revenue recognition occurs upon delivery to the customer. If multiple products are ordered together, each product is considered a separate performance obligation, and the transaction price is allocated to each performance obligation based on the standalone selling price. Revenue is recognized upon satisfaction of each performance obligation. We generally determine the standalone selling prices based on the prices charged to our customers.
We record deferred revenue when cash payments are received in advance of our satisfaction of the related performance obligation. The satisfaction of performance obligations generally occur shortly after cash payment and we expect to recognize our deferred revenue balance as revenue within three months subsequent to March 31, 2019.
We periodically provide marketing materials and promotional offers to new customers and existing customers that are intended to improve customer retention. These incentive offers are generally available to all customers and, therefore, do not represent a performance obligation as customers are not required to enter into a contractual commitment to receive the offer. These discounts are recognized as a reduction to the transaction price when used by the customer. Costs related to free products are included within cost of revenue and sample products are included within marketing and selling expense.
We have elected to apply the practical expedient under ASC 340-40-25-4 to expense incremental direct costs as incurred, which primarily includes sales commissions, since our contract periods generally are less than one year and the related performance obligations are satisfied within a short period of time.
Additional revenue disaggregation disclosure requirements resulting from the adoption of ASC 606 are included in Note 13.     
Share-based Compensation
Total share-based compensation expense was $7,754 and $13,950 for the three and nine months ended March 31, 2019, respectively, and $13,492 and $33,718 for the three and nine months ended March 31, 2018, respectively.
During the first quarter of fiscal 2018, we issued supplemental performance share units ("supplemental PSUs") to certain members of management (excluding Robert Keane, our Chairman and CEO) that were incremental to our typical long-term incentive award grants. The supplemental PSUs are subject to a three-year cumulative financial performance condition intended to provide a stretch goal for participants in addition to service vesting and share price performance conditions. The evaluation of achievement of the performance condition is at the discretion of the Compensation Committee and, therefore, the awards are subject to mark-to-market accounting throughout the performance vesting period. Beginning in the second quarter of fiscal 2018, we concluded that the achievement of the performance condition was probable and recognized $15,397 of expense cumulatively through the first quarter of fiscal 2019. In the second quarter of fiscal 2019, which is seasonally significant, we concluded that the achievement of the three-year cumulative performance condition was no longer probable, and we reversed the previously recognized expense of $15,397. As of March 31, 2019 we continued to consider achievement of the

10


performance condition to not be probable. If, in a future period, we determine that it is probable that the financial performance condition will be achieved based on our financial performance, we will cumulatively catch up the expense in that period.
Foreign Currency Translation
Our non-U.S. dollar functional currency subsidiaries translate their assets and liabilities denominated in their functional currency to U.S. dollars at current rates of exchange in effect at the balance sheet date, and revenues and expenses are translated at average rates prevailing throughout the period. The resulting gains and losses from translation are included as a component of accumulated other comprehensive loss. Transaction gains and losses and remeasurement of assets and liabilities denominated in currencies other than an entity’s functional currency are included in other (expense) income, net in our consolidated statements of operations.
Other (Expense) Income, Net
The following table summarizes the components of other (expense) income, net:
 
Three Months Ended March 31,

Nine Months Ended March 31,
 
2019

2018

2019

2018
Gains (losses) on derivatives not designated as hedging instruments (1)
$
1,258


$
(9,102
)

$
19,802


$
(19,103
)
Currency-related (losses) gains, net (2)
(4,085
)

7,519


(3,011
)

(7,133
)
Other gains
332


25


595


634

Total other (expense) income, net
$
(2,495
)

$
(1,558
)

$
17,386


$
(25,602
)
_____________________
(1) Primarily relates to both realized and unrealized gains (losses) on derivative currency forward and option contracts not designated as hedging instruments.
(2) We have significant non-functional currency intercompany financing relationships that we may change at times and are subject to currency exchange rate volatility. The currency-related (losses) gains, net for the three and nine months ended March 31, 2019 and 2018 are primarily driven by this intercompany activity. In addition, we have certain cross-currency swaps designated as cash flow hedges, which hedge the remeasurement of certain intercompany loans, both presented in the same component above. Unrealized gains related to cross-currency swaps were $2,146 and $3,389 for the three and nine months ended March 31, 2019, respectively, as compared to unrealized losses of $3,582 and $9,708 for the three and nine months ended March 31, 2018, respectively.
Net Income (Loss) Per Share Attributable to Cimpress N.V.
Basic net income (loss) per share attributable to Cimpress N.V. is computed by dividing net income (loss) attributable to Cimpress N.V. by the weighted-average number of ordinary shares outstanding for the respective period. Diluted net income (loss) per share attributable to Cimpress N.V. gives effect to all potentially dilutive securities, including share options, restricted share units (“RSUs”), restricted share awards ("RSAs") and performance share units ("PSUs"), if the effect of the securities is dilutive using the treasury stock method. Awards with performance or market conditions are included using the treasury stock method only if the conditions would have been met as of the end of the reporting period and their effect is dilutive.

The following table sets forth the reconciliation of the weighted-average number of ordinary shares:
 
Three Months Ended March 31,
 
Nine Months Ended March 31,
 
2019
 
2018
 
2019
 
2018
Weighted average shares outstanding, basic
30,763,055

 
30,724,018

 
30,837,207

 
30,992,066

Weighted average shares issuable upon exercise/vesting of outstanding share options/RSUs/RSAs
751,738

 

 
943,934

 
1,284,454

Shares used in computing diluted net income (loss) per share attributable to Cimpress N.V.
31,514,793

 
30,724,018

 
31,781,141

 
32,276,520

Weighted average anti-dilutive shares excluded from diluted net income (loss) per share attributable to Cimpress N.V. (1)

 
1,448,530

 

 
3,054

_____________________
(1) In the periods in which a net loss is recognized, the impact of share options, RSUs, and RSAs is not included as they are anti-dilutive.

11


Build-to-Suit Lease Arrangements
For accounting purposes, we were deemed to be the owner of two projects during their respective construction periods: the Waltham, Massachusetts office building lease and a lease executed during the first quarter of fiscal 2019 for a production facility in Dallas, Texas. For both build-to-suit leases, property, plant and equipment, net, was $121,108 and $111,926 as of March 31, 2019 and June 30, 2018, respectively, related to the buildings. The financing lease obligation and deferred rent credit related to the buildings on our consolidated balance sheets was $124,526 and $115,312 as of March 31, 2019 and June 30, 2018, respectively. All additions during the current period were capitalized construction costs related to the Dallas facility.
Recently Issued or Adopted Accounting Pronouncements
New Accounting Standards Adopted
In May 2017, the FASB issued Accounting Standards Update No. 2017-09, "Compensation - Stock Compensation (Topic 718)," (ASU 2017-09), which clarifies the application of Topic 718 when accounting for changes in the terms and conditions of a share-based payment award. Under the new standard, changes to the terms or conditions of a share-based payment award are to be accounted for under modification accounting unless there is no change to the fair value, vesting conditions and classification of the award after modification. We adopted the amendment on its effective date of July 1, 2018. The amendment is applied prospectively, and the new standard did not have a material impact on our consolidated financial statements.
In November 2016, the FASB issued Accounting Standards Update No. 2016-18, "Statement of Cash Flows (Topic 230) Restricted Cash" (ASU 2016-18), which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. We adopted the new standard on July 1, 2018. The new standard did not have a material effect on our consolidated financial statements.
In March 2016, the FASB issued Accounting Standards Update No. 2016-04, "Liabilities - Extinguishment of Liabilities (Subtopic 405-20): Recognition of Breakage for Certain Prepaid Stored-Value Products" (ASU 2016-04), which requires an entity to recognize breakage for a liability resulting from the sale of a prepaid stored-value product in proportion to the pattern of rights expected to be exercised by the product holder only to the extent that it is probable that a significant reversal of the recognized breakage amount will not subsequently occur. The new standard is effective for us on July 1, 2018. The standard should be applied either retrospectively to each period presented or by means of a cumulative adjustment to retained earnings as of the beginning of the fiscal year adopted. We adopted the new standard on July 1, 2018. The new standard did not have a material effect on our consolidated financial statements.
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, "Revenue from Contracts with Customers" (ASU 2014-09), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This guidance replaced most existing revenue recognition guidance in U.S. GAAP. The new standard is effective for us as of July 1, 2018. The standard permits the use of either the retrospective or modified retrospective method. We adopted the new standard during the first quarter of fiscal 2019. Refer to the information above for additional details of the adoption.

12


Issued Accounting Standards to be Adopted
In August 2018, the FASB issued Accounting Standards Update No. 2018-15 "Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40)" (ASU 2018-15), which requires a customer in a cloud computing arrangement that is a service contract to follow the internal use software guidance in ASC 350-40 to determine which implementation costs to capitalize as assets or expense as incurred. The new standard is effective for us on July 1, 2020. We are currently evaluating the requirements of the standard, and we have not yet determined the impact of adoption on our consolidated financial statements.    
In August 2017, the FASB issued Accounting Standards Update No. 2017-12, "Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities (Topic 815)," (ASU 2017-12), which better aligns a company’s financial reporting for hedging activities with the economic objectives of those activities. The amendment is effective for us on July 1, 2019 and permits early adoption, including adoption in an interim period. The standard requires a modified retrospective transition approach, in which we will recognize the cumulative effect of the change on the opening balance of each affected component of equity in the statement of financial position as of the date of adoption. We do not expect this standard to have material impact on our consolidated financial statements.
In March 2016, the FASB issued Accounting Standards Update No. 2016-02, "Leases (Topic 842)" (ASU 2016-02), which requires the recognition of lease assets and lease liabilities by lessees for those leases currently classified as operating leases. The standard also retains a distinction between finance leases and operating leases. The new standard is effective for us on July 1, 2019 and we expect to adopt the new standard using the modified retrospective approach. We also plan to use the transition relief package, in which we will not reassess the classification of our existing leases, whether any expired or existing contracts contain leases and if our existing leases have any initial direct costs. We have substantially completed the process of collecting our existing lease contracts and we are currently implementing changes to our systems and processes. While we expect the new standard to have a material impact on our consolidated balance sheet, we have not yet determined the full impact of adoption on our consolidated financial statements.
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:

13


 
March 31, 2019
 
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
$
2,329

 
$

 
$
2,329

 
$

Currency forward contracts
12,483

 

 
12,483

 

Currency option contracts
6,238

 

 
6,238

 

Total assets recorded at fair value
$
21,050

 
$

 
$
21,050

 
$

 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Interest rate swap contracts
$
(3,223
)
 
$

 
$
(3,223
)
 
$

Cross-currency swap contracts
(11,351
)
 

 
(11,351
)
 

Currency forward contracts
(1,857
)
 

 
(1,857
)
 

Total liabilities recorded at fair value
$
(16,431
)
 
$

 
$
(16,431
)
 
$


 
June 30, 2018
 
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
$
13,370

 
$

 
$
13,370

 
$

Currency forward contracts
9,202

 

 
9,202

 

Currency option contracts
1,782

 

 
1,782

 

Total assets recorded at fair value
$
24,354

 
$

 
$
24,354

 
$

 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
Cross-currency swap contracts
$
(25,348
)
 
$

 
$
(25,348
)
 
$

Currency forward contracts
(14,201
)
 

 
(14,201
)
 

Currency option contracts
(85
)
 

 
(85
)
 

Total liabilities recorded at fair value
$
(39,634
)
 
$

 
$
(39,634
)
 
$

During the quarter ended March 31, 2019 and year ended June 30, 2018, 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 March 31, 2019, 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.

14



As of March 31, 2019 and June 30, 2018, the carrying amounts of our cash and cash equivalents, accounts receivable, accounts payable, and other current liabilities approximated their estimated fair values. As of March 31, 2019 and June 30, 2018 the carrying value of our debt, excluding debt issuance costs and debt discounts, was $1,087,603 and $839,429, respectively, and the fair value was $1,073,602 and $847,520, respectively. Our debt at March 31, 2019 includes variable-rate debt instruments indexed to LIBOR that resets periodically, as well as 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 five of our interest rate swap contracts was deemed to be ineffective during the three and nine months ended March 31, 2019 and during the three and nine months ended March 31, 2018, a portion of seven 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 March 31, 2019, we estimate that $786 of income will be reclassified from accumulated other comprehensive loss to interest expense during the twelve months ending March 31, 2020. As of March 31, 2019, we had ten outstanding interest rate swap contracts indexed to USD 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 March 31, 2019
 
$
440,000

Contracts with a future start date
 
90,000

Total
 
$
530,000

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.

15


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 March 31, 2019, 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 March 31, 2019, we estimate that $453 will be reclassified from accumulated other comprehensive loss to interest expense, net during the twelve months ending March 31, 2020.
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 March 31, 2019, we had two outstanding cross-currency swap contracts that we de-designated as net investment hedges with a total notional amount of $122,969, both maturing during April 2019. Our de-designated hedges were replaced by forward contracts that we executed during the current quarter and were designated as net investment hedges.
We did not hold any ineffective or de-designated cross-currency swaps during the three and nine months ended March 31, 2018.
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 March 31, 2019, we had ten currency forward contracts designated as net investment hedges with a total notional amount of $326,718, maturing during various dates through April 2024. 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 two consolidated subsidiaries that have Euro as their functional currency. Amounts reported in accumulated other comprehensive loss are recognized as a component of our cumulative translation adjustment.
We have elected to not apply hedge accounting for all other currency forward and option contracts. During the three and nine months ended March 31, 2019 and 2018, 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 March 31, 2019, 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, Mexican Peso, New Zealand Dollar, Norwegian Krone, Philippine Peso and Swedish Krona:
Notional Amount
 
Effective Date
 
Maturity Date
 
Number of Instruments
 
Index
$719,830
 
December 2017 through March 2019
 
Various dates through March 2021
 
550
 
Various

16


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 March 31, 2019 and June 30, 2018. Our derivative asset and liability balances will fluctuate with interest rate and currency exchange rate volatility.
 
March 31, 2019
 
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 current assets / other assets
 
$
2,329

 
$

 
$
2,329

 
Other current liabilities / other liabilities
 
$
(3,378
)
 
$
155

 
$
(3,223
)
Cross-currency swaps
Other current assets
 

 

 

 
Other current liabilities
 
(3,839
)
 

 
(3,839
)
Derivatives in net investment hedging relationships
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Currency forward contracts
Other non-current assets
 
4,194

 

 
4,194

 
Other current liabilities / other liabilities
 
(2,250
)
 
637

 
(1,613
)
Total derivatives designated as hedging instruments

 
$
6,523

 
$

 
$
6,523

 

 
$
(9,467
)
 
$
792

 
$
(8,675
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cross-currency swaps
Other current assets
 
$

 
$

 
$

 
Other current liabilities
 
$
(7,512
)
 
$

 
$
(7,512
)
Currency forward contracts
Other current assets / other assets
 
12,385

 
(4,096
)
 
8,289

 
Other current liabilities / other liabilities
 
(545
)
 
301

 
(244
)
Currency option contracts
Other current assets / other assets
 
6,238

 

 
6,238

 
Other current liabilities / other liabilities
 

 

 

Total derivatives not designated as hedging instruments
 
 
$
18,623

 
$
(4,096
)
 
$
14,527

 

 
$
(8,057
)
 
$
301

 
$
(7,756
)

17



June 30, 2018

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

$
13,374


$
(4
)

$
13,370


Other current liabilities / other liabilities

$


$


$

Cross-currency swaps
Other non-current assets







Other liabilities

(10,659
)



(10,659
)
Derivatives in net investment hedging relationships
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cross-currency swaps
Other non-current assets







Other liabilities

(14,689
)



(14,689
)
Currency forward contracts
Other non-current assets







Other liabilities

(13,387
)



(13,387
)
Total derivatives designated as hedging instruments


$
13,374


$
(4
)

$
13,370




$
(38,735
)

$


$
(38,735
)
















Derivatives not designated as hedging instruments















Currency forward contracts
Other current assets / other assets

$
10,433


$
(1,231
)

$
9,202


Other current liabilities / other liabilities

$
(1,080
)

$
266


$
(814
)
Currency option contracts
Other current assets / other assets
 
1,782

 

 
1,782

 
Other current liabilities / other liabilities
 
(85
)
 

 
(85
)
Total derivatives not designated as hedging instruments


$
12,215


$
(1,231
)

$
10,984




$
(1,165
)

$
266


$
(899
)
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 nine months ended March 31, 2019 and 2018:
 
Amount of Gain (Loss) Recognized in Comprehensive Income (Loss) on Derivatives (Effective Portion)
 
Three Months Ended March 31,
 
Nine Months Ended March 31,
 
2019
 
2018
 
2019
 
2018
Derivatives in cash flow hedging relationships
 
 
 
 
 
 
 
Interest rate swaps
$
(6,102
)
 
$
6,087

 
$
(10,916
)
 
$
7,330

Cross-currency swaps
(1,273
)
 
2,321

 
(2,656
)
 
5,492

Derivatives in net investment hedging relationships
 
 
 
 
 
 
 
Cross-currency swaps
1,542

 
(3,873
)
 
6,557

 
(10,307
)
Currency forward contracts
7,050

 
(5,576
)
 
14,369

 
(13,935
)
Total
$
1,217

 
$
(1,041
)
 
$
7,354

 
$
(11,420
)

18


The following table presents reclassifications out of accumulated other comprehensive loss for the three and nine months ended March 31, 2019 and 2018:
 
Amount of Net Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss into Income
 
Affected line item in the
Statement of Operations
 
Three Months Ended March 31,
 
Nine Months Ended March 31,
 
 
 
2019
 
2018
 
2019
 
2018
 
 
Derivatives in cash flow hedging relationships
 
 
 
 
 
 
 
 
 
Interest rate swaps
$
(314
)
 
$
100

 
$
(105
)
 
$
(6
)
 
Interest expense, net
Cross-currency swaps
2,146

 
(3,321
)
 
5,920

 
(8,756
)
 
Other (expense) income, net
Total before income tax
1,832

 
(3,221
)
 
5,815

 
(8,762
)
 
Income before income taxes
Income tax
(458
)
 
805

 
(1,454
)
 
2,212

 
Income tax expense (benefit)
Total
$
1,374

 
$
(2,416
)
 
$
4,361

 
$
(6,550
)
 
 
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 (Loss)
 
Affected line item in the
Statement of Operations
 
Three Months Ended March 31,
 
Nine Months Ended March 31,
 
 
 
2019
 
2018
 
2019
 
2018
 
 
Currency contracts
$
1,258

 
$
(9,103
)
 
$
19,802

 
$
(19,382
)
 
Other (expense) income, net
Interest rate swaps
29

 
1

 
(185
)
 
279

 
Other (expense) income, net
Total
$
1,287

 
$
(9,102
)
 
$
19,617

 
$
(19,103
)
 
 
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 $4,566 for the nine months ended March 31, 2019:

Gains (losses) on cash flow hedges (1)
 
Translation adjustments, net of hedges (2)
 
Total
Balance as of June 30, 2018
$
8,195

 
$
(78,009
)
 
$
(69,814
)
Other comprehensive (loss) income before reclassifications
(13,572
)
 
8,223