Vistaprint 2009 Annual Report Download - page 69

Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk. Our exposure to interest rate risk relates primarily to our cash and cash
equivalents and investments. At June 30, 2009, we had unrestricted cash and cash equivalents,
primarily invested in money market funds, totaling $134.0 million and a long-term investment in a
municipal auction rate security totaling $0.8 million. These amounts are held for working capital
purposes, we do not enter into investments for trading or speculative purposes. We considered the
historical volatility of short term interest rates. A hypothetical 1% (100 basis-point) increase in interest
rates would have resulted in an immaterial decrease in the fair values of our investments at June 30,
2009.
Currency Exchange Rate Risk. As we conduct business in multiple international currencies
through our worldwide operations but report our financial results in U.S. Dollars, we are affected by
fluctuations in exchange rates of such currencies versus the U.S. Dollar. Fluctuations in exchange
rates can positively or negatively affect our revenue and profits. Our subsidiaries in the Netherlands,
Spain, France and Tunisia have the euro as their functional currency. Our subsidiary in Switzerland
has the Swiss franc as its functional currency. Each of these subsidiaries translate their assets and
liabilities at current rates of exchange in effect at the balance sheet date. The resulting gains and
losses from translation are included as a component of accumulated other comprehensive income on
the balance sheet. Transaction gains and losses generated from revenue and operating expenses in
currencies other than the functional currency of a subsidiary and remeasurement of assets and
liabilities denominated in currencies other than the functional currency of a subsidiary are included in
other (expense) income, net on the statement of income. In addition, our subsidiaries have
intercompany accounts that are eliminated in consolidation, but that expose us to fluctuations in foreign
currency exchange rates. Exchange rate fluctuations on short-term intercompany accounts are also
reported in other (expense) income, net on the statement of income. Our currency transaction gains
(losses) included in other (expense) income, net were not material in fiscal 2009, 2008, and 2007. We
are not currently party to any derivative financial instruments as hedges against currency fluctuations.
We considered the historical trends in currency exchange rates. A hypothetical 10% change in
currency exchange rates was applied to total net monetary assets denominated in currencies other
than the local currencies at the balance sheet dates to compute the impact these changes would have
had on our income before taxes in the near term. A hypothetical decrease in exchange rates of 10%, or
strengthening of the United States dollar, would have resulted in a decrease of $1.6 million on our
income before taxes for fiscal 2009. A similar decrease in exchange rates of 10%, or strengthening of
the United States dollar, would have resulted in a decrease of $0.9 million on our income before taxes
for fiscal 2008.
Our Dutch subsidiary maintains a credit facility with ABN AMRO Bank N.V. pursuant to which it
has borrowings of 6.2 million euro. At June 30, 2009, we had short-term borrowings related to current
portion of long-term debt denominated in euro. The carrying value of these short-term borrowings
approximates fair value due to their short period to maturity. Assuming a hypothetical 10% increase or
decrease in the euro to United States dollar period end exchange rate, the impact to the fair value of
these short-term borrowings would be immaterial. The potential increase or decrease in fair value was
estimated by calculating the fair value of the short-term borrowings at June 30, 2009 and comparing
that with the fair value using the hypothetical period end exchange rate.
Form 10-K
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