Vistaprint 2014 Annual Report Download - page 45

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Income tax provision
Year Ended June 30,
2014 2013 2012
Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,590 $ 9,387 $ 11,851
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.7% 23.0% 21.2%
Income tax expense for fiscal 2013 included a one-time currency exchange related tax benefit of $1.9
million recognized by one of our Canadian subsidiaries. Excluding this one-time benefit, income tax expense would
have been lower in fiscal 2014 as compared to fiscal 2013 primarily attributable to tax benefits resulting from
changes to our corporate entity operating structure that became effective on October 1, 2013, as further described
below.
On an annual basis, our income tax expense for the majority of our subsidiaries is a function of our
operating expenses and cost-based transfer pricing methodologies and not a function of consolidated pre-tax
income. As a result, our consolidated annual effective tax rate will typically vary inversely to changes in our
consolidated pre-tax income. For fiscal 2014, we had a lower consolidated annual effective tax rate as compared to
fiscal 2013, primarily as a result of higher consolidated pre-tax earnings in fiscal 2014 as compared to fiscal 2013
plus tax benefits resulting from changes to our corporate entity operating structure in fiscal 2014, described below.
On October 1, 2013, we made changes to our corporate entity operating structure, including transferring our
intellectual property among certain of our subsidiaries, primarily to align our corporate entities with our evolving
operations and business model. The transfer of assets occurred between wholly owned legal entities within the
Vistaprint group that are based in different tax jurisdictions. The impact of the transfer is recognized for income tax
purposes only and not in our consolidated financial statements. As the impact of the transfer was the result of an
intra-entity transaction, any resulting gain or loss and immediate tax impact on the transfer is eliminated and not
recognized in the consolidated financial statements under U.S. GAAP. The transferor entity recognized a gain on
the transfer of assets that was not subject to income tax in its local jurisdiction. However, the recipient entity will
receive a tax benefit associated with the future amortization of the fair market value of the intellectual property
received, which for tax purposes will occur over a period of five years in accordance with the applicable tax laws.
We are currently under income tax audits in various jurisdictions. We believe that our income tax reserves
associated with these matters are adequate as the positions reported on our tax returns will be sustained on their
technical merits. However, final resolution is uncertain and there is a possibility that it could have a material impact
on our financial condition, results of operations or cash flows. See Note 14 in our accompanying consolidated
financial statements for additional discussion.
Loss in Equity Interest
In July 2012, we made an investment in Namex, which included a Chinese printing business, for a minority
ownership position. Our share of Namex's loss for the fiscal years ended June 30, 2014 and 2013 was $2.7 million
and $1.9 million, respectively. We disposed of our investment in April 2014 and recognized a loss of $12.7 million in
other income (expense), net. See Note 15 in our accompanying consolidated financial statements for additional
discussion.
Liquidity and Capital Resources
Consolidated Statements of Cash Flows Data:
In thousands
Year Ended June 30,
2014 2013 2012
Net cash provided by operating activities . . . . . . . . . . . . $ 148,580 $ 140,012 $ 140,641
Net cash used in investing activities . . . . . . . . . . . . . . . . (306,984) (98,931) (232,268)
Net cash provided by (used in) financing activities . . . . . 169,608 (53,255) (79,167)
Form 10-K