Vistaprint 2015 Annual Report Download - page 53

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Other Obligations. Other obligations include an installment obligation of $13.3 million related to the fiscal
2012 intra-entity transfer of the intellectual property of our subsidiary Webs, Inc., which resulted in tax being paid
over a 7.5 year term and has been classified as a deferred tax liability in our consolidated balance sheet as of
June 30, 2015. Other obligations also include the fair value of the contingent consideration payments related to our
fiscal 2014 acquisition of Printdeal of $7.8 million and the deferred payment for our fiscal 2015 acquisition of
druck.at of $3.0 million. Please refer to Note 3 and 8 in the accompanying consolidated financial statements for
additional details.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk. Our exposure to interest rate risk relates primarily to our cash, cash equivalents and
debt.
As of June 30, 2015, our cash and cash equivalents consisted of standard depository accounts which are
held for working capital purposes. We do not believe we have a material exposure to interest rate fluctuations
related to our cash and cash equivalents.
As of June 30, 2015, we had $232.0 million of variable rate debt and $13.3 million of variable rate
installment obligation related to the fiscal 2012 intra-entity transfer of Webs' intellectual property. As a result, we
have exposure to market risk for changes in interest rates related to these obligations. In order to mitigate our
exposure to interest rate changes related to our variable rate debt, we execute interest rate swap contracts to fix the
interest rate on a portion of our outstanding long-term debt with varying maturities. As of June 30, 2015, a
hypothetical 100 basis point increase in rates, inclusive of our outstanding interest rate swaps, would result in an
increase of interest expense of approximately $0.9 million over the next 12 months.
Currency Exchange Rate Risk. We conduct business in multiple currencies through our worldwide
operations but report our financial results in U.S. dollars. We manage these risks through normal operating activities
and, when deemed appropriate, through the use of derivative financial instruments. We have policies governing the
use of derivative instruments and do not enter into financial instruments for trading or speculative purposes. The
use of derivatives is intended to reduce, but do not entirely eliminate, the impact of adverse currency exchange rate
movements. A summary of our currency risk is 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. dollars. 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 and
non-GAAP financial metrics, such as EBITDA.
Our most significant net currency exposures by volume are in the British Pound, Canadian Dollar, Euro and
Swiss Franc, although our exposures to these and other currencies fluctuate, particularly in our fiscal
second quarter. Beginning in the fourth quarter of fiscal 2015, our currency hedging objectives are targeted
at reducing volatility in our forecasted U.S. dollar-equivalent EBITDA in order to protect our debt covenants.
Since EBITDA excludes non-cash items such as depreciation and amortization that are included in net
income, we may experience increased, not decreased, volatility in our GAAP results.
In addition, we elect to execute currency forward contracts that do not qualify for hedge accounting. As a
result, we may experience volatility in our consolidated statements of operations due to (i) the impact of
unrealized gains and losses reported in other income (expense), net on the mark-to-market of outstanding
contracts and (ii) realized gains and losses recognized in other income (expense), net, whereas the
offsetting economic gains and losses are reported in the line item of the underlying cash flow, for example,
revenue.
• Translation of our non-U.S. dollar assets and liabilities: Each of our subsidiaries translates its assets and
liabilities to U.S. dollars 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 (loss)
income on the consolidated balance sheet. Fluctuations in exchange rates can materially impact the
carrying value of our assets and liabilities.
Form 10-K