Vistaprint 2012 Annual Report Download - page 54

50
Long-Term Debt. Amounts outstanding are due at maturity of our credit facility on October 21, 2016.
Interest payable included in this table is based on the interest rate as of June 30, 2012 and assumes all amounts
outstanding will not be paid until maturity.
Other Obligations. Includes the installment obligation related to the intra-entity transfer of Webs' Intellectual
Property, which results in tax being paid over a 7.5 year term and has been classified as a deferred tax liability in
our consolidated balance sheet as of June 30, 2012.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk. Our exposure to interest rate risk relates primarily to our cash, cash equivalents and
long-term debt. As of June 30, 2012, our cash and cash equivalents consisted of standard depository accounts
which are held for working capital purposes. Due to the nature of our investments, we do not believe we have a
material exposure to interest rate fluctuations.
As of June 30, 2012, we have $229.0 million of total U.S. dollar denominated variable rate long-term debt.
As a result, we have exposure to market risk for changes in interest rates related to these obligations. A hypothetical
100 basis point increase in rates would result in an annual increase of interest expense of approximately $2.3
million. In order to mitigate this exposure related to hypothetical interest rate changes,, we began to execute interest
rate swap contracts in July 2012 to fix the interest rate on a portion of our outstanding long-term debt. These
contracts are with financial institutions that we judge to be credit-worthy and we do not plan to hold or issue
derivative financial instruments for trading or speculative purposes.
Currency Exchange Rate Risk. We conduct business in multiple currencies through our worldwide
operations but report our financial results in U.S. dollars. Therefore, we are affected by fluctuations in exchange
rates of such currencies versus the U.S. dollar as follows:
• Translation of our non-U.S. dollar revenues and expenses: Revenue and related expenses generated in
currencies other than the U.S. dollar could result in higher or lower net income when, upon consolidation,
those transactions are translated to U.S. dollars. When the value or timing of revenue and expenses in a
given currency are materially different, we may be exposed to significant impacts on our net income.
• Remeasurement of monetary assets and liabilities: Transaction gains and losses generated from
remeasurement of monetary assets and liabilities denominated in currencies other than the functional
currency of a subsidiary are included in other income (expense), net on the consolidated statements of
income. Our subsidiaries have intercompany accounts that are eliminated in consolidation and cash and
cash equivalents denominated in various currencies that expose us to fluctuations in currency exchange
rates. A hypothetical 10% change in currency exchange rates was applied to total net monetary assets
denominated in currencies other than the functional currencies at the balance sheet dates to compute the
impact these changes would have had on our income before taxes in the near term. A hypothetical
decrease in exchange rates of 10% against the functional currency of our subsidiaries would have resulted
in an increase of $2.1 million and $0.8 million on our income before taxes for fiscal years 2012 and 2011,
respectively, and a decrease of $0.7 million on our income before income taxes for the fiscal year 2010. .
Additionally, some of our subsidiaries prepare tax returns in currencies other than their functional currency.
In such cases, we are exposed to transaction gains or losses for tax purposes that are different than those
recorded in other income (expense), net and could result in a significant tax benefit or loss.
• Translation of our non-U.S. dollar assets and liabilities: Each of our subsidiaries translates its assets and
liabilities to U.S. dollars at current rates of exchange in effect at the balance sheet date. The resulting gains
and losses from translation are included as a component of accumulated other comprehensive (loss)
income on the consolidated balance sheet. Fluctuations in exchange rates can materially impact the
carrying value of our assets and liabilities.
Foreign currency transaction gains included in other income (expense), net for the year ended June 30,
2012 were $2.4 million. Foreign currency transaction losses included in other income (expense), net for the years
ended June 30, 2011 and 2010 were $2.1 million, and $1.5 million, respectively.