Shutterfly 2012 Annual Report Download - page 33

• concerns about the security of online transactions and the privacy of personal information;
• delayed shipments or shipments of incorrect or damaged products; and
• inconvenience associated with returning or exchanging purchased items.
If purchasers of digital photography products and services do not choose to shop online, our net
revenues and results of operations would be harmed.
The third party software systems that we utilize to assist us in the calculation and reporting of financial data may
contain errors that we may not identify in a timely manner.
We use numerous third party licensed software packages, most notably our equity software and our
enterprise resource planning software, which are complex and fully integrated into our financial reporting.
Such third party software may contain errors that we may not identify in a timely manner. If those errors
are not identified and addressed timely, our financial reporting may not be in compliance with generally
accepted accounting principles.
If our internal controls are not effective, there may be errors in our financial information that could require a
restatement or delay our SEC filings, and investors may lose confidence in our reported financial information,
which could lead to a decline in our stock price.
It is possible that we may discover significant deficiencies or material weaknesses in our internal
control over financial reporting in the future. Any failure to maintain or implement required new or
improved controls, or any difficulties we encounter in their implementation, could cause us to fail to meet
our periodic reporting obligations, or result in material misstatements in our financial information. Any
such delays or restatements could cause investors to lose confidence in our reported financial information
and lead to a decline in our stock price.
Maintaining and improving our financial controls and the requirements of being a public company may strain our
resources, divert management’s attention and affect our ability to attract and retain qualified board members.
As a public company, we are subject to the reporting requirements of the Securities Exchange Act of
1934, the Sarbanes-Oxley Act of 2002 and the rules and regulations of The NASDAQ Stock Market. In
addition, the recently passed Dodd-Frank Wall Street Reform and Consumer Protection Act contains
various provisions applicable to the corporate governance functions of public companies. Additional or
new regulatory requirements may be adopted in the future. The requirements of existing and potential
future rules and regulations will likely continue to increase our legal, accounting and financial compliance
costs, make some activities more difficult, time-consuming or costly and may also place undue strain on our
personnel, systems and resources.
The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls
and procedures and effective internal control over financial reporting. Significant resources and
management oversight are required to design, document, test, implement and monitor internal control
over relevant processes and to remediate any deficiencies. As a result, management’s attention may be
diverted from other business concerns, which could harm our business, financial condition and results of
operations. These efforts also involve substantial accounting related costs. In addition, if we are unable to
continue to meet these requirements, we may not be able to remain listed on The NASDAQ Global Select
Market.
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