Vistaprint 2013 Annual Report Download - page 46

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In October 2011, we executed our credit facility which resulted in $1.7 million of net interest expense for
fiscal year 2012 compared with interest income of $0.2 million in fiscal 2011 before our credit facility was put in
place.
Income tax provision
Year Ended June 30,
2013 2012 2011
Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,387 $ 11,851 $ 9,013
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.0% 21.2% 9.9%
Income tax expense decreased to $9.4 million for fiscal 2013, as compared to $11.9 million for fiscal 2012
and increased, as compared to $9.0 million for fiscal 2011. The decrease in tax from fiscal 2012 is primarily a result
of the recognition in fiscal 2013 of a $1.9 million deferred tax benefit associated with an election made by one of our
Canadian subsidiaries to file its tax reporting using U.S. dollars and other unfavorable tax adjustments recognized
in fiscal 2012. Excluding these items, tax expense would have been higher in fiscal 2013 compared to fiscal 2012.
On an annual basis, the income tax expense for the majority of our subsidiaries is mainly a function of our operating
expenses and cost-based transfer pricing methodologies and not a function of consolidated pre-tax income.
Accordingly, our effective tax rate will typically vary inversely to changes in our consolidated pre-tax income, and we
expect this variation will continue in future periods.
The increase in the overall effective tax rate for fiscal 2013, as compared to fiscal 2012 is primarily due to
the reduction in our consolidated pre-tax income as a result of increased planned investments in support of our
long-term growth strategy, increases in valuation allowances for certain jurisdictions for which management has
determined that it is more likely than not that not all net deferred tax assets will be realized in the foreseeable future,
and higher tax expense associated with the fiscal 2012 transfer of the Webs’ global sales and distribution rights,
customer lists, marketing intangibles, web-based technologies, software tools, and related technical data and know-
how (collectively "Webs Intellectual Property"). The overall increase in our fiscal 2013 overall effective tax rate and
income tax expense was partially offset by the aforementioned recognition of a $1.9 million deferred tax benefit
associated with an election made by one of our Canadian subsidiaries to file its tax reporting using U.S. dollars.
The increase in the overall effective tax rate during the year ended June 30, 2012 as compared to June 30,
2011 is primarily due to the reduction in our consolidated pre-tax income as a result of planned investments in
support of our long-term growth strategy, tax expense associated with the transfer of the Webs Intellectual Property,
and the expiration of the U.S. federal research and development tax credit on December 31, 2011.
On January 2, 2012, one of our subsidiaries purchased Webs Intellectual Property in order to align the
Webs business with our global operations. As this was an intra-entity transfer, the tax cost to be incurred by Webs
associated with the gain recognized on the transfer has been deferred in other assets in the consolidated balance
sheet and will be amortized into tax expense over a weighted average period of approximately 13 years. The
subsidiary elected to purchase the Webs’ Intellectual Property using an installment obligation that results in the tax
being paid over a 7.5 year term and, therefore, the related tax liability has been included in deferred tax liabilities in
the consolidated balance sheet.
We are currently under income tax audits in various jurisdictions. We believe that our income tax reserves
associated with these matters are adequate as the positions reported on our tax returns will be sustained on their
technical merits. However, final resolution is uncertain and there is a possibility that it could have a material impact
on our financial condition, results of operations or cash flows. See Note 13 in our accompanying consolidated
financial statements for additional discussion.
Loss in Equity Interest
In July 2012, we made an investment in Namex Limited and its related companies ("Namex"), which
includes a Chinese printing business, for a 34.5% proportionate ownership. Our share of the loss for the fiscal year
ended June 30, 2013 was $1.9 million. See Note 14 in our accompanying consolidated financial statements for
additional discussion.
Form 10-K