Vistaprint 2010 Annual Report Download - page 60

Long-Term Debt. During the second quarter of fiscal 2010, the remaining balance of our
euro revolving credit agreement and the final balloon payment on our original Canadian credit
agreement were paid in the amounts of $6.1 million and $6.0 million, respectively.
In December 2005, we amended our original Canadian credit agreement to include an
additional $10.0 million equipment term loan. The borrowings were used to finance printing equipment
purchases for the Windsor production facility. The loan is payable in monthly installments, which
began December 1, 2006 and continue through 2010, plus interest, with the remaining balance of
$4.7 million to be paid in December 2010. As of June 30, 2010, the interest rates on the amended
Canadian credit agreement range from 7.82% to 8.50% and there was $5.2 million outstanding under
this term loan.
Operating Leases. We rent office space under operating leases expiring on various dates
through 2018. Future rental payments required under our leases are an aggregate of approximately
$46.2 million. The terms of the individual lease agreements require security deposits in the form of
bank guarantees and a letter of credit in the amount of $0.8 million and $0.7 million, respectively.
Purchase Commitments. At June 30, 2010, we had unrecorded commitments under
contracts to expand our Canadian production facility of approximately $1.4 million, and commitments
under contract for site development and construction of our Jamaican customer support and design
center of approximately $2.9 million. We also had unrecorded commitments under contracts at
June 30, 2010 to purchase production equipment for our Dutch and Australian production facilities of
approximately $1.3 million and $0.3 million, respectively.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk. Our exposure to interest rate risk relates primarily to our cash
equivalents and marketable securities that at June 30, 2010 consisted of money market funds,
certificates of deposit, corporate debt securities, U.S government and agency securities, and a long-
term investment in a municipal auction rate security. These cash equivalents and marketable
securities are held for working capital purposes and we do not enter into investments for trading or
speculative purposes. Our fixed rate interest bearing securities could decline in value if interest rates
rise. Due to the nature of our investments, we do not believe we have a material exposure to interest
rate risk.
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 as follows:
•Translation of our non-U.S. dollar revenues and expenses: Revenue and related expenses
generated in currencies other than the U.S. dollar could result in higher or lower net
income when, upon consolidation, those transactions are translated to U.S. dollar. When
the value or timing of revenue and expenses in a given currency are materially different, we
may be exposed to significant impacts on our net income.
•Remeasurement of monetary assets and liabilities: Transaction gains and losses generated
from remeasurement of monetary assets and liabilities denominated in currencies other
than the functional currency of a subsidiary are included in other (expense) income, net on
the consolidated statements of income. Our subsidiaries have intercompany accounts that
are eliminated in consolidation, and cash and cash equivalents denominated in various
currencies that expose us to fluctuations in currency exchange rates. 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
56