Vistaprint 2007 Annual Report Download - page 56

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Other expense, net
Other income (expense), net changed by $0.5 million of income for fiscal 2007 as compared to
$0.5 million of expense for fiscal 2006. Other income (expense), net changed by $0.1 million of
expense for fiscal 2006 as compared to $0.4 million of expense for fiscal 2005. These changes were
driven by foreign exchange losses realized during the fiscal year.
Interest expense
Interest expense increased by $0.5 million during fiscal 2007 to $1.8 million as compared to $1.3
million in fiscal 2006. Interest expense increased by $0.9 million during fiscal 2006 to $1.3 million as
compared to $0.4 million in fiscal 2005. These increases were due to bank loan obligations that were
used to finance, in part, the construction of our Dutch and Canadian production facilities and various
print production equipment purchases we made during the period.
Income tax provision
In thousands
Year Ended June 30,
2007 2006 2005
Income taxes:
Income tax provision ............................................... $2,880 $783 $ 84
Effective tax rate .................................................... 9.6% 3.9% 0.5%
For the fiscal year ended June 30, 2007, our tax expense primarily consisted of tax provisions for
our subsidiaries in the United States, the Netherlands, Spain and Canada. The taxable income for the
United States, Dutch, Spanish and Canadian entities is a function of their level of costs incurred and
charged to VistaPrint Limited under service agreements, which we also refer to as transfer pricing
agreements. The resulting tax liability is incurred regardless of whether the consolidated group is
profitable.
In April 2006, the United States Internal Revenue Service completed its audit of our United States
subsidiary, VistaPrint USA, Incorporated, for the fiscal year ending June 30, 2003. We had established
tax reserves in excess of the ultimate settled amounts and as a result of the settlement we reversed
$0.2 million of excess income tax reserves during March 2006. In addition, in May 2006, we reversed
excess income tax reserves of $0.7 million related to the expiration of a tax audit statute of limitations
relating to a prior fiscal year. These reversals were accounted for as discrete events and resulted in an
income tax benefit of $0.9 million. As a result of these reversals our effective tax rate for the fiscal year
ended June 30, 2006 was 3.9%. As this effective tax rate included the impact of discrete tax reserve
reversals, we expect that our effective tax rate will increase in the near future.
Net income (loss)
Our net income for the fiscal year ended June 30, 2007 was $27.1 million, or 10.6% of revenue.
Our net income for the fiscal year ended June 30, 2006 was $19.2 million, or 12.7% of revenue. We
had a net loss for the fiscal year ended June 30, 2005 of $16.2 million. Included in this loss is the $21.0
million loss on contract termination related to the termination of our existing supply agreements with
Mod-Pac.
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