Vistaprint 2007 Annual Report Download - page 25

Standards No. 123, Accounting for Stock-Based Compensation, allowed companies the choice of
either using a fair value method of accounting for stock awards that would result in expense recognition
for all such awards granted, or using an intrinsic value method, as prescribed by Accounting Principles
Board Opinion, or APB, No. 25, Accounting for Stock Issued to Employees, with a pro forma disclosure
of the impact on net income (loss) of using the fair value method of accounting for stock based awards.
Prior to our adoption of FASB Statement No. 123(R), “Share Based Payment,” or Statement 123(R), on
July 1, 2005, we had elected to apply APB 25 and accordingly we generally did not recognize any
expense with respect to employee options to acquire our common shares in periods ended on or prior
to June 30, 2005 as long as such options were granted at exercise prices equal to the fair value of our
common shares on the date of grant.
Statement 123(R) requires that the compensation cost relating to share-based payment
transactions be recognized in financial statements. This cost is measured based on the fair value of the
equity instruments issued. We adopted Statement 123(R) on July 1, 2005, which was the first day of
our 2006 fiscal year. The adoption of Statement 123(R) had an adverse affect on our operating results
for the fiscal year ended June 30, 2007. We expect that we will continue to use share based
compensation awards to attract, motivate and retain our employees. Therefore, we expect the resulting
share-based compensation expense will continue to increase, which will continue to adversely affect
our operating results in future periods as compared to periods ended on or prior to June 30, 2005.
Our quarterly financial results may fluctuate which may lead to volatility in our share price.
Our future revenues and operating results may vary significantly from quarter-to-quarter due to a
number of factors, many of which are outside of our control. Factors that could cause our quarterly
operating results to fluctuate include, among others:
‰demand for our services and products;
‰our ability to attract visitors to our websites and convert those visitors into customers;
‰our ability to retain customers and encourage repeat purchases;
‰business and consumer preferences for printed products and graphic design services;
‰shifts in product mix toward lower gross margin products;
‰investment decisions by management made in relation to our performance against targeted
earnings per share levels;
‰our ability to manage our production and fulfillment operations;
‰currency fluctuations, which affect not only our revenues but also our costs;
‰the costs to produce our products and to provide our services;
‰our pricing and marketing strategies and those of our competitors;
‰improvements to the quality, cost and convenience of desktop printing;
‰costs of expanding or enhancing our technology or websites;
‰compensation expense and charges related to our awarding of share-based compensation;
and
‰a significant increase in credits, beyond our estimated allowances, for customers who are not
satisfied with our products.
In addition, management investment decisions may lead to fluctuations in our quarterly financial
results. We currently plan to invest annual earnings per share We base our operating expense budgets
in part on expected revenue trends. A portion of our expenses, such as office leases and various
Form 10-K
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