Vistaprint 2014 Annual Report Download - page 44

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General and administrative expense
General and administrative expense consists primarily of transaction costs, including third-party
professional fees, insurance and payroll and related expenses of employees involved in executive management,
finance, legal, and human resources.
During fiscal 2014 our general and administrative expenses increased as compared to fiscal 2013 by $6.5
million, primarily due to an increase of $5.9 million in professional fees for costs incurred related to our recent
acquisitions and strategic investments, as well as $3.2 million of employee and facility related restructuring costs. In
addition, we recognized $2.2 million of expense for the increase in the fair value of the earn-out liability for both
People & Print Group and Pixartprinting since the date of acquisition. These increases were partially offset by a net
decrease of $4.8 million primarily related to reduced share-based compensation, recruiting costs, and other
corporate charges. At June 30, 2014 we employed 416 employees in these organizations compared to 400
employees at June 30, 2013.
During fiscal 2013, our general and administrative expenses increased as compared to fiscal 2012 by $4.9
million, primarily due to increased payroll and facility-related costs of $6.1 million resulting from the continued
investment in our executive management, finance, legal and human resource organizations to support our
expansion and growth. At June 30, 2013, we employed 400 employees in these organizations compared to 369
employees at June 30, 2012. These additional payroll related costs were offset by a $1.2 million decrease in
professional fees, as the fiscal 2012 comparable period included transaction costs associated with our Albumprinter
and Webs acquisitions. Additionally, fiscal 2012 included expenses associated with a patent infringement trial, which
did not recur in fiscal 2013, as well as certain one-time termination benefits.
Other income (expense), net
Other income (expense), net generally consists of gains and losses from currency exchange rate
fluctuations on transactions or balances denominated in currencies other than the functional currency of our
subsidiaries, as well as the realized and unrealized gains and losses on our derivative instruments. In addition, in
fiscal 2014 we recognized a loss of $12.7 million on the sale of our equity investment in Namex.
In addition to the Namex loss noted above, we incurred $8.9 million of currency related expense for fiscal
2014, as compared to $0.1 million of expense for fiscal 2013. The increased expense is primarily due to the net loss
of $7.5 million recognized on our currency forward contracts for which we did not seek hedge accounting and that
did not occur in fiscal 2013. This expense was substantially offset by favorable currency impacts within operating
income. In evaluating our currency hedging program and ability to achieve hedge accounting in light of certain
changes in our legal entity cash flows, we considered the benefits of hedge accounting relative to the additional
economic cost of trade execution and administrative burden. Based on this analysis, we decided to execute
currency forward contracts that do not qualify for hedge accounting. As a result, during fiscal 2014, we experienced
increased volatility within other (expense), net in our consolidated statements of operations from unrealized gains
and losses on the mark-to-market of outstanding currency forward contracts. We expect this volatility to continue in
future periods for contracts for which we do not apply hedge accounting.
In addition, changes in our corporate entity operating structure, effective on October 1, 2013, required us to
alter our intercompany transactional and financing activities. We have significant non-functional currency
intercompany financing relationships that result in increased currency exchange rate losses of $1.5 million, both
realized and unrealized, during fiscal 2014. We may continue to experience increased volatility in exchange rate
gains and losses in future periods as a result of these changes.
Other income (expense) for fiscal 2012 was $2.4 million of income, primarily related to a gain in the period
from Euro currency transactions related to the funding of the Albumprinter acquisition.
Interest income (expense), net
Interest income (expense), net, primarily consists of interest paid to financial institutions on outstanding
balances on our credit facility and amortization of debt issuance costs of $7.7 million, $5.3 million, $1.7 million for
fiscal 2014, 2013 and 2012, respectively. The increase in interest income (expense), net in each fiscal period as
compared to the prior fiscal period is a result of increased borrowing levels under our credit facility throughout the
respective years.