Vistaprint 2015 Annual Report Download - page 96

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16. Variable Interest Entities ("VIE")
VIE of which we are the Primary Beneficiary
Investment in Printi LLC
On August 7, 2014, we made a capital investment in Printi LLC, which operates in Brazil. This investment
provides us access to a new market and the opportunity to drive longer-term growth in Brazil. We paid $5,360 in
cash for preferred shares and made a $2,850 capital contribution in exchange for a 41.6% equity interest in Printi
with call options to increase our ownership incrementally over a 9-year period by purchasing equity interests either
directly from Printi or from certain employee shareholders. We exercised the first contingent call option in the fourth
quarter of fiscal 2015 to acquire newly issued preferred shares which increased our ownership to 49.99% as of
June 30, 2015.
Based upon the level of equity investment at risk, Printi is considered a variable interest entity. The
shareholders 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 both the power
to direct the activities that most significantly impact the entity's economic performance and 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.
As we are the primary beneficiary, our consolidated financial statements include the accounts of Printi from
August 7, 2014. The results are immaterial to our consolidated statements of operations for the year ended June
30, 2015. We have recognized the assets and liabilities on the basis of their fair values at the date of our
investment, with any excess of the purchase price paid over the fair value of the net assets recorded as goodwill. Of
the total purchase price of $5,360, $7,469 was allocated to goodwill, $2,465 to noncontrolling interests, $697 to
acquired intangible assets and $341 to net liabilities.
We have call options to increase our ownership in Printi incrementally over a nine-year period with certain
employee shareholders. As the employees' restricted stock in Printi is contingent on post-acquisition employment,
share-based compensation will be recognized over the four-year vesting period. The awards are considered liability
awards and will be marked to fair value each reporting period. In order to estimate the fair value of the award as of
June 30, 2015, we utilized a lattice model with a Monte Carlo simulation. The current fair value of the award is
$6,066 and we have recognized $1,405 in general and administrative expense for the year ended June 30, 2015.
VIE of Which We are Not the Primary Beneficiary
Namex Limited
In the fourth quarter of fiscal 2014, we disposed of our investment in Namex Limited and its related
companies, as discussions with management identified different visions in the execution of the long-term strategic
direction of the business. We sold all of our Namex shares to Namex's majority shareholder and recognized a loss
of $12,681, in other income (expense), net in our consolidated statement of operations for the year ended June 30,
2014. Prior to the sale, our investment was accounted for using the equity method, as the investment was
considered a VIE and we were not the primary beneficiary. We recorded in net income a proportionate share of the
earnings or losses of Namex, as well as related amortization, with a corresponding increase or decrease in the