Vistaprint 2008 Annual Report Download - page 57

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%.
Liquidity and Capital Resources
Consolidated Statements of Cash Flows Data:
Year Ended June 30,
2008 2007 2006
(in thousands)
Capital expenditures............................................. $(62,740) $(62,845) $(24,929)
Development of software and website ............................. (5,696) (4,189) (2,656)
Depreciation and amortization .................................... 25,193 14,874 7,786
Cash flows from operating activities ............................... 87,731 54,240 34,637
Cash flows used in investing activities............................. (58,056) (62,177) (71,410)
Cash flows from financing activities ............................... 2,980 12,716 74,851
At June 30, 2008, we had $129.7 million of cash, cash equivalents and marketable securities.
Cash equivalents and marketable securities are comprised of commercial paper investment-grade
corporate bonds, certificates of deposit, U.S. government agency issues and municipal auction rate
securities. Historically, we have financed our operations through internally generated cash flows from
operations, sales of common and preferred shares and the use of bank loans. We believe that our
available cash and cash flows generated from operations will be sufficient to satisfy our working
capital, long-term debt and capital expenditure requirements for the foreseeable future.
As of June 30, 2008, approximately $2.5 million, of our short term investments were invested in
auction rate securities as compared to $16.9 million at June 30, 2007. These auction rate securities are
collateralized by portfolios of AAA and Aaa American municipal and federally insured obligations.
During fiscal year 2008, certain auctions relating to our holdings failed resulting in our continuing to
hold these securities and the issuers paying the maximum rate which has been reset due to the failure
of the auction. The high reset rates have caused a portion of our holdings to be called by issuers
during the year. We believe the reset rates have provided sufficient incentive to security issuers to
address this lack of liquidity in the near term. We have the intent and the ability to hold these
investments until the anticipated recovery period which we believe will be less than twelve months. We
will continue to monitor and evaluate these investments on a quarterly basis for impairment or the need
to reclassify as long-term investments. Subsequent to June 30, 2008, the Company sold $1.8 million of
its auction rate securities in the Company’s marketable securities portfolio at par.
Operating Activities. Cash provided by operating activities primarily consists of net income
adjusted for certain non-cash items including depreciation and amortization, loss on disposal of
equipment, impairment loss on equipment, share-based compensation costs, deferred taxes, tax
benefits derived from share-based compensation awards and the effect of changes in working capital
and other activities. Cash provided by operating activities in fiscal 2008 was $87.7 million and
consisted of net income of $39.8 million, positive adjustments for non-cash items of $36.7 million and
$11.2 million provided by working capital and other activities. Adjustments for non-cash items included
$25.2 million of depreciation and amortization expense on property and equipment and software and
website development costs, $14.8 million of share-based compensation expense, $2.0 million of
Form 10-K
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