Vistaprint 2008 Annual Report Download - page 50

personnel. The customer support operations provide phone and e-mail support to customers on
various topics such as order status, the use of our website graphic design studio, and free real-time
design assistance. Marketing and selling expense also includes third party payment processor and
credit card fees.
General and administrative expense. General and administrative expense consists of general
corporate costs, including salary and related payroll benefit expenses of employees involved in
finance, accounting, human resources and general executive management.
Interest income. Interest income consists of interest income earned on cash and cash
equivalents and marketable securities.
Other income (expense), net. Other income (expense), net primarily consists of gains and
losses from foreign currency transactions.
Interest expense. Interest expense consists of interest paid to financial institutions on
outstanding balances on our credit facilities.
Income taxes. VistaPrint Limited is a Bermuda based company. Bermuda does not currently
impose any tax computed on profits or income, which results in a zero tax liability for our profits
recorded in Bermuda. VistaPrint Limited has operating subsidiaries in the Netherlands, Canada,
Jamaica, Spain, Switzerland and the United States. VistaPrint Limited has entered into service and
related agreements, which we also refer to as transfer pricing agreements, with each of these
operating subsidiaries. These agreements effectively result in VistaPrint Limited paying each of these
subsidiaries for its costs plus a fixed mark-up on these costs. The Jamaican subsidiary is located in a
tax free zone, so its tax rate is zero. Our Dutch, Canadian, Spanish, Swiss and American subsidiaries
are each located in jurisdictions that tax profits and, accordingly, regardless of our consolidated results
of operations, these subsidiaries will typically incur tax expense in their respective jurisdictions.
Initial Public Offering. On September 29, 2005, we closed our initial public offering, or IPO, in
which we sold 5,500,000 common shares at a price to the public of $12.00 per share. The net
proceeds of the IPO to us, which we received on October 5, 2005, were approximately $61.4 million
after deducting underwriting discounts. Upon the closing of the IPO, all of our outstanding convertible
preferred shares converted into an aggregate of 22,720,543 common shares.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with accounting principles
generally accepted in the United States. To apply these principles, we must make estimates that affect
our reported amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. In many instances, we reasonably could have used different
accounting estimates and, in other instances, changes in the accounting estimates are reasonably
likely to occur from period to period. Accordingly, actual results could differ significantly from our
estimates. To the extent that there are material differences between these estimates and actual
results, our financial condition or results of operations will be affected. We base our estimates on
historical experience and other assumptions that we believe to be reasonable under the circumstances
at the time they are made, and we evaluate these estimates on an ongoing basis. We refer to
accounting estimates of this type as critical accounting policies and estimates, which are discussed
further below.
Revenue Recognition. We generate revenues primarily from the printing and shipping of
customized printed products, such as business cards, postcards, brochures, magnets, T-shirts,
presentation folders and folded greeting cards.We recognize revenue arising from sales of printed
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