Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. CIMPRESS N.V. (1262976) 10-Q published on May 02, 2019 at 5:12 pm
Reporting Period: Mar 30, 2019
(1) These liabilities relate to share-based compensation awards and mandatorily redeemable noncontrolling interest associated with our Printi business. During the third quarter of fiscal 2019, we recognized a decrease to these liabilities due to a reduction in the estimated present value of the future settlement amount, which is calculated based on certain contractual financial measures in the period we expect the put or call option to be exercised. As the estimated contractual settlement value has decreased, we have reclassified $14,531 of the aggregate liability to a contra-asset as a reserve against the associated loan receivable asset that represents prepayments for these obligations. Refer to Note 12 for additional details.
Our income tax expense was $4,091 and $23,971 for the three and nine months ended March 31, 2019, as compared to $4,019 and $19,657 for the prior comparable periods. The increase in tax expense is primarily attributable to increased pre-tax income for the three and nine months ended March 31, 2019 as compared to the same prior year periods. There were no significant discrete tax adjustments recognized during the three months ended March 31, 2019. However, earlier this year we recognized a decrease in deferred tax assets related to guidance issued by the Internal Revenue Service regarding limitations on tax deductions for compensation granted to certain executives, which increased our tax expense by $5,574 for the nine months ended March 31, 2019 as compared to increased tax expense of $4,701 related to the impacts of U.S. tax reform recognized in the same prior year period. We also recognized "Patent Box" tax benefits of $3,547 granted to our Pixartprinting business in Italy during the nine months ended March 31, 2019. Additionally, we have recognized lower excess tax benefits from share based compensation for the nine months ended March 31, 2019 as compared to the same prior period. Excluding the effect of these discrete tax adjustments, our estimated annual effective tax rate is lower for fiscal 2019 as compared to fiscal 2018 primarily due to an expectation of a more favorable geographical mix of
consolidated earnings. Our effective tax rate continues to be negatively impacted by losses in certain jurisdictions where we are unable to recognize a full tax benefit in the current period.
For accounting purposes, of the remaining equity interests, 36.2% are liability-based equity awards and 10.1% are mandatorily redeemable noncontrolling interests. We agreed to acquire all of the remaining equity interests in Printi through a reciprocal put and call structure, contractually exercisable from April 1, 2021 through a mandatory redemption date of July 31, 2023. The liability-based equity awards represent Printi restricted equity held by Printi employees that are now fully vested and marked to market each reporting period until cash settlement. As of March 31, 2019 and June 30, 2018, our estimated redemption value for the liability-based awards was $6,791 and $15,464, respectively. The mandatorily redeemable noncontrolling interest is within the scope of ASC 480 - "Distinguishing Liabilities from Equity" 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. As of March 31, 2019 and June 30, 2018, we recognized a liability for the mandatorily redeemable noncontrolling interest of $2,630 and $4,366, respectively. In May 2017, we entered into an arrangement with two Printi equity holders to provide loans, which represent prepayments for our future purchase of their equity interests. The loans are payable on the date the put or call option is exercised and the loan proceeds will be used to offset our purchase of their remaining outstanding equity interest, which also serves as collateral. As of March 31, 2019, the gross loan receivable includes $21,000 of loans and accrued interest of $2,660, a portion of the interest which is due and payable in the fourth quarter of fiscal 2019.
For the third quarter of fiscal 2019, operating income increased $13.0 million due primarily to improved profitability in our Vistaprint business driven by a reduction in advertising expense, as well as a decrease in share-based compensation expense. The decrease in share-based compensation expense is due to no recognition of expense for our supplemental PSUs in the current quarter since we continued to consider achievement of the performance condition to not be probable, as well as reduced board compensation with the changes we made in November 2018 that reduced the number of directors on our board of directors. These increases in operating income were partially offset by an increase in restructuring charges of $5.5 million, related primarily to actions taken in our Vistaprint business. During the nine months ended March 31, 2019, operating income declined primarily due to the prior year gain of $47.5 million on the sale of Albumprinter, which did not recur during the current period.
Vistaprint's segment profit increased for the three and nine months ended March 31, 2019 driven primarily by $16.5 million and $15.1 million, respectively, of reductions to advertising spend. Segment profit also increased as a result of reductions to operating expenses, partially offset by the gross margin impact of changes in product mix. Some of the near-term operating expense savings will be offset, as we recruit additional talent within Vistaprint's data, analytics and technology organizations, and we are not allocating the cost of executives to the Vistaprint business while these positions are filled by Cimpress executives on an interim basis. In the current period, Vistaprint's segment profit was negatively impacted by currency movements.