Shutterfly 2009 Annual Report Download - page 74

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SHUTTERFLY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 — Description of Business
Shutterfly, Inc., (the “Company”)
was incorporated in the state of Delaware in 1999 and began its services in December 1999. The
Company is an Internet-
based social expression and personal publishing service that enables customers to share, print and preserve their
memories by leveraging a technology-
based platform and manufacturing processes. The Company provides customers a full range of products
and services to organize and archive digital images; share pictures; order prints and create an assortment of personalized items such as cards,
calendars and photo books. The Company is headquartered in Redwood City, California.
On September 29, 2006, the Company completed its initial public offering (“IPO”)
in which the Company sold 5,800,000 shares of its
common stock at a price to the public of $15.00 per share. As a result of the IPO, a total of $87.0 million in gross proceeds was raised, with net
proceeds to the Company of $78.5 million after deducting underwriting fees and commissions of $6.1 million and other offering costs of
$2.4 million. Upon the closing of the IPO, all shares of the Company’
s outstanding redeemable convertible preferred stock automatically
converted into an aggregate of 13,862,773 common shares.
Note 2 — Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All
intercompany transactions and balances have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets
and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period.
Significant items subject to such estimates and assumptions include, among others, intangible assets valuation and useful lives, excess and
obsolete inventories, deferred tax valuation allowance, restructuring and legal contingencies. Actual results could differ from these estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original maturities (at the date of purchase) of three months or less to
be cash equivalents. Management determines the appropriate classification of cash equivalents at the time of purchase and reevaluates such
designations at each balance sheet date. Cash equivalents consist principally of money market funds and commercial paper.
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