Acquisitions

KBZ

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

Under the asset purchase agreement, the Company acquired the assets of KBZ for a cash payment of $64.6 million. The Company acquired $3.1 million of cash during the acquisition, resulting in $61.5 million net cash paid for KBZ. Per the asset purchase agreement, a portion of the purchase price was placed into escrow to indemnify the Company of any pre-acquisition damages. As of September 30, 2016, the balance available in escrow was $5.0 million.

The purchase price of this acquisition was allocated to the assets acquired and liabilities assumed based on their estimated fair values on the transaction date. Pro forma results of operations have not been presented for this acquisition because the results of this acquisition are not material to our consolidated results. The purchase price allocation is as follows:



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

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

Intelisys

On August 29, 2016, the Company acquired substantially all the assets of Intelisys, a technology services company with voice, data, cable, wireless, and cloud services. Intelisys is part of the Company's Worldwide Communications and Services operating segment. With this acquisition, the Company broadens its capabilities in the telecom and cloud services market and generates the opportunity for high-growth recurring revenue.

Under the asset purchase agreement, the Company structured the purchase transaction with an initial cash payment of approximately $84.6 million, which consists of an initial purchase price of $83.6 million and $1.0 million for additional net assets acquired at closing, plus four additional annual cash installments based on a form of adjusted EBITDA for the periods ending June 30, 2017 through June 30, 2020. The Company acquired $0.8 million of cash during the acquisition, resulting in $83.8 million net cash paid for Intelisys initially. Per the asset purchase agreement, a portion of the purchase price was placed into escrow to indemnify the Company of any pre-acquisition damages. As of September 30, 2016, the balance available in escrow was $8.5 million.

The purchase price of this acquisition was allocated to the assets acquired and liabilities assumed based on their estimated fair values on the transaction date. Due to the proximity of the acquisition date to the end of the quarter, the valuation of tangible assets, identifiable intangible assets, and goodwill is still in process at the date of this filing, therefore, the estimates provided are subject to change.



	Intelisys
	(in thousands)
Receivables, net	$	23,494
Other current assets	27
Property and equipment, net	5,198
Goodwill	109,005
Identifiable intangible assets	63,210
	$	200,934
Accounts payable	21,063
Accrued expenses and other current liabilities	1,067
Contingent consideration	95,000
Consideration transferred, net of cash acquired	83,804
	$	200,934

Following the acquisition date, Intelisys contributed net sales of $2.9 million, operating income of $0.7 million, and net income of $0.2 million. Intelisys net income for the period described included $0.5 million of amortization expense related to identified intangible assets and a $0.8 million loss for the change in fair value of contingent consideration.

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

For the two months ended August 31, 2016 and the quarter ended September 30, 2015, the Company has not provided for a change in fair value of contingent consideration.



	Quarter ended September 30, 2016
	(in thousands, except per share data)

	As Reported, Consolidated		Pro forma, Consolidated ⁽¹⁾
Net Sales	$	932,566	$	937,782
Operating income	22,875		24,247
Net Income	14,816		15,386
Earnings per share:
Basic	$	0.58	$	0.60
Diluted	$	0.58	$	0.60

(1) Includes actual results for Intelisys for the two months ended August 31, 2016. Adjustments include additional amortization expense of $1.1 million and depreciation expense of $0.2 million for the quarter ended September 30, 2016 as if the fair value of identifiable intangible assets, including software, had been recorded on July 1, 2015, and additional income tax expense of $0.8 million. In addition, acquisition costs in the amount of $0.4 million have been added back.



	Quarter ended September 30, 2015
	(in thousands, except per share data)

	As Reported, Consolidated		Pro forma, Consolidated ⁽²⁾
Net Sales	$	870,829	$	878,052
Operating income	24,441		26,554
Net Income	15,996		16,631
Earnings per share:
Basic	$	0.58	$	0.60
Diluted	$	0.57	$	0.60

(2) Includes actual results for Intelisys for the three months ended September 30, 2015. Adjustments include intangible amortization expense of $1.6 million and depreciation expense of $0.3 million for the quarter ended September 30, 2015 as if the fair value of identifiable intangible assets, including software, had been recorded on July 1, 2015, and additional income tax expense of $1.5 million.