Shutterfly 2009 Annual Report Download - page 54

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Interest expense increased by $94,000 for 2008 primarily due to amortization associated with the line of credit origination costs.
Interest and other income, net decreased by $2.6 million for 2008, primarily as a result of an overall lower yield on our investment portfolio,
including our auction rate securities, relative to our investment balances in 2007. In November 2008, we accepted an offer from UBS AG
("UBS"), one of our investment advisors, entitling us to sell at par value auction-
rate securities originally purchased from UBS (approximately
$52.3 million, par value) at anytime during a two-
year period from June 30, 2010 through July 2, 2012 (the "Right"). As of December 31, 2008,
we recorded $9.0 million as the fair value of the Right, classified as long-
term investment on the balance sheet as of December 31, 2008, with a
corresponding credit to interest and other income, net, for the year ended December 31, 2008.
This is offset by a reclassification adjustment to
record an other than temporary impairment loss on our auction rate securities of $9.0 million which had previously been recognized as a
component of other comprehensive income, net of tax.
The provision for income taxes was $1.8 million for 2008, compared to a provision of $6.3 million for 2007. Our effective tax rate was 28%
in 2008, down from 38% in 2007. This decrease in our effective tax rate is primarily the result of additional tax credits related to our research
and development activity from 2007.
As of December 31, 2008, we had approximately $12.1 million of federal and $32 million of state net operating loss carryforwards available
to reduce future taxable income. These net operating loss carryforwards begin to expire in 2021 and 2014 for federal and state tax purposes,
respectively.
Net income decreased by $5.5 million, or 55%, for 2008 as compared to 2007. As a percentage of net revenue, net income was 2% of net
revenue for 2008 compared to 5% for 2007.
Year Ended December 31,
2008
2007
Change
(In thousands)
Interest Expense
$
(273
)
$
(179
)
$
(94
)
Interest and other income, net
$
2,898
$
5,515
$
(2,617
)
Year Ended December 31,
2008
2007
(In thousands)
Income tax provision
$(1,792)
$(6,302)
Effective tax rate
28%
38%
Year Ended December 31,
2008
2007
$ Change
% Change
(In thousands)
Income before income taxes
$6,353
$16,397
$(10,044)
(61)%
Net income
$4,561
$10,095
$(5,534)
(55)%
Percentage of net revenues
2%
5%
—
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52