The consolidated financial statements include the accounts of Stamps.com Inc., Auctane LLC, Interapptive, Inc., PSI Systems Inc., ShippingEasy Group, Inc., and PhotoStamps Inc. In June 2014, we completed our acquisition of 100% of the outstanding equity of Auctane LLC, a Texas limited liability company that operates ShipStation (“Auctane LLC” or “ShipStation”) in a cash and contingent stock transaction. ShipStation, based in Austin, Texas, offers web-based multi-carrier shipping solutions primarily under the brands ShipStation and Auctane. In August 2014, we completed our acquisition of 100% of the outstanding equity of Interapptive, Inc., a Missouri corporation, that operates ShipWorks (“Interapptive, Inc.” or “ShipWorks”) in a cash transaction. ShipWorks, based in St. Louis, Missouri, offers software-based multi-carrier shipping solutions. In November 2015, we completed our acquisition of 100% of the outstanding shares of PSI Systems, Inc. (“Endicia”). Endicia, based in Mountain View, California, offers mailing and shipping solutions for use with the USPS. In July 2016, we completed our acquisition of 100% of the outstanding shares of ShippingEasy Group, Inc. (“ShippingEasy”). ShippingEasy, based in Austin, Texas, offers web-based multi-carrier shipping solutions. See
Note 3 – “Acquisitions”
for further discussion of our acquisitions.
Because 100% of the voting control of Auctane LLC, Interapptive, Inc., PSI Systems, Inc., and ShippingEasy Group, Inc. is held by us, we have consolidated the results of operations of ShipStation, ShipWorks, Endicia and ShippingEasy from the date we obtained control in the accompanying consolidated financial statements. Similarly, due to our 100% control of PhotoStamps, Inc., PhotoStamps Inc. is also consolidated in the accompanying consolidated financial statements from the date of its inception. All significant intercompany accounts and transactions have been eliminated.
The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“US GAAP”) requires us to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates, and such differences may be material to the financial statements. Examples include estimates of loss contingencies, realizability of deferred income taxes, the estimates and assumptions used to calculate stock-based compensation, the estimates and assumptions used to calculate the allocation of the purchase price related to our acquisitions, including related contingent consideration, and estimates regarding the useful lives of our building, patents and other amortizable intangible assets, and goodwill.
Our accounts receivable relate to mailing and shipping services, postage purchasing and invoicing, PhotoStamps sales, and branded insurance provided to customers prior to billing and other receivables. Accounts receivable are recorded at the invoiced amount, net of allowances for uncollectible accounts of approximately $1,188,000, $831,000 and $414,000 as of December 31, 2016, 2015 and 2014, respectively.
We evaluate the collectability of our accounts receivable based on a combination of factors. If we become aware of a customer’s inability to meet its financial obligations, an allowance is recorded to reduce the net receivable to the amount reasonably believed to be collectible from the customer. For all other customers, we recognize allowances for doubtful accounts based on the length of time the receivables are past due, the current business environment and our historical experience. If the financial condition of our customers deteriorates, resulting in their inability to make payments, additional provisions are recorded in that period. Accounts receivable are written off against the allowance for uncollectible accounts when we determine amounts are no longer collectible.
Increases in allowance for doubtful accounts totaled approximately $356,000, $417,000 and $131,000 for 2016, 2015 and 2014, respectively. There were no material write offs against the allowance for doubtful accounts during 2016, 2015 or 2014.
We expense the costs of producing advertisements as incurred, and expense the costs of communicating and placing the advertising in the period in which the advertising space or airtime is used. For the years ended December 31, 2016, 2015 and 2014, advertising and tradeshow costs were $12.1 million, $10.8 million and $9.7 million, respectively.
The acquisition method of accounting is used for business combinations. The results of operations of acquired businesses are included in our consolidated financial statements prospectively from the date of acquisition. The fair value of purchase consideration is allocated to the assets acquired and liabilities assumed from the acquired entity and is generally based on their fair value at the acquisition date. The excess of the fair value of purchase consideration over the fair value of the assets acquired and liabilities assumed is recorded as goodwill. Historically the primary items that have generated goodwill include anticipated synergies between the acquired business and the Company and the acquired assembled workforce, neither of which qualifies for recognition as an intangible asset. Acquisition-related expenses are recognized in our consolidated financial statements as incurred.
We are subject to various routine litigation matters as a claimant and a defendant. We record any amounts recovered in these matters when received. We establish loss provisions for claims against us when the loss is both probable and can be reasonably estimated. If either or both of the criteria are not met, we assess whether there is at least a reasonable possibility that a loss, or additional losses, may have been incurred. If there is a reasonable possibility that a loss or additional loss may have been incurred for such proceedings, we disclose the estimate of the amount of loss or possible range of loss, or disclose that an estimate of loss cannot be made, as applicable.
We consider all highly liquid investments with an original or remaining maturity of three months or less at the date of purchase to be cash equivalents.
Our cash equivalents and investments consisted of money market funds, asset-backed securities and public corporate debt securities at December 31, 2016 and 2015. All investments are classified as available for sale and are recorded at market value using the specific identification method. Realized gains and losses are reflected in interest and other income, net while unrealized gains and losses are included as a separate component of stockholders' equity.
Our cash, cash equivalents and investments are subject to market risk, primarily interest rate and credit risk. Our investments are managed by a limited number of outside professional managers within investment guidelines set by us. Such guidelines include security type, credit quality and maturity and are intended to limit market risk by restricting our investments. From time to time, our investments held with financial institutions may exceed Federal Deposit Insurance Corporation insurance limits. Interest rate fluctuations and changes in credit ratings impact the carrying value of our portfolio.
Our outstanding borrowings under our Credit Agreement are subject to market risk, primarily interest rate risk. Interest rate fluctuations impact the interest expense incurred on borrowings under the Credit Agreement, as the interest rate is based on the London Interbank Offered Rate.
During 2016, 2015 and 2014, we did not recognize revenue from any one customer that represented 10% or more of revenues.
Cost of service revenue principally consists of the cost of customer service, system operating costs, credit card processing fees and customer misprints that do not qualify for reimbursement from the USPS. Cost of product revenue principally consists of the cost of products sold through our Supplies Stores and the related costs of shipping and handling. The cost of insurance revenue principally consists of parcel insurance offering costs through our third party insurance partners. Cost of customized postage revenue principally consists of the face value of postage, image review costs and printing and fulfillment costs.
Our deferred revenue relates mainly to service revenue and PhotoStamps retail boxes. Deferred revenue related to our service revenue generally arises due to the timing of payment versus the provision of services for certain customers billed in advance. We previously sold PhotoStamps retail boxes to our customers through our website and selected third parties. Proceeds from the sale of our PhotoStamps retail boxes were initially recorded as a liability when received. We recorded the liability for outstanding PhotoStamps retail boxes in deferred revenue. We no longer sell PhotoStamps retail boxes.
Carrying amounts of certain of our financial instruments, including cash, cash equivalents, accounts receivable and accounts payable, approximate fair value due to their short maturities. The fair values of investments are determined using quoted market prices for those securities or similar financial instruments. The Company’s outstanding debt held by third-party financial institutions is carried at cost, adjusted for debt issuance costs. The Company’s debt is not publicly traded and the carrying amounts typically approximate fair value for debt that accrues interest at a variable rate for companies with similar financial characteristics as the Company, which are considered Level 2 inputs.
The $63.2 million fair value of the contingent consideration liability related to our acquisition of ShipStation as of December 31, 2015 was calculated by multiplying the expected earn-out shares by our stock price. During 2015 we recorded approximately $47.4 million of charges relating to our contingent consideration liability of which $46.1 million was recorded in contingent consideration charges and $1.3 million was recorded in marketing and research and development in operating expenses. See
Note 3 – “Acquisitions”
for a further description of the contingent consideration relating to our acquisition of ShipStation.
General and administrative expense principally consists of compensation and related costs for executive and administrative personnel, fees for legal and other professional services, depreciation of equipment and software used for general corporate purposes and amortization of intangible assets.
Goodwill represents the excess of the fair value of consideration given over the fair value of the tangible assets, identifiable intangible assets and liabilities assumed in a business combination. We are required to test goodwill for impairment annually and whenever events or circumstances indicate the fair value of a reporting unit may be below its carrying value. Goodwill is reviewed for impairment annually on October 1. A reporting unit is the operating segment or a business that is one level below that operating segment. Reporting units are aggregated as a single reporting unit if they have similar economic characteristics. We aggregated our reporting units into a single reporting unit because we determined they have similar economic characteristics. There was no impairment to our goodwill related to our acquisitions.
Long-lived assets including intangible assets with finite useful lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.
Intangible assets that have indefinite useful lives are not amortized but, instead, tested at least annually for impairment while intangible assets that have finite useful lives continue to be amortized over their respective useful lives.
We account for income taxes in accordance with Financial Accounting Standards Board (“FASB”) ASC Topic No. 740, Income Taxes (“ASC 740”), which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax basis of recorded assets and liabilities. ASC 740 also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the net deferred tax assets will not be realized.
We record a valuation allowance to reduce our gross deferred tax assets to the amount that is more likely than not (a likelihood of more than 50 percent) to be realized. In order for us to realize our deferred tax assets, we must be able to generate sufficient taxable income. We evaluate the appropriateness of our deferred tax assets and related valuation allowance in accordance with ASC 740 based on all available positive and negative evidence. As of December 31, 2016 and 2015 we do not have any valuation allowance recorded to reduce our gross deferred tax assets as we believe we have met the more likely than not threshold we will realize our tax loss carry-forwards in the foreseeable future.
We recognize Internet advertising expense based on the specifics of the individual agreements. Under partner and affiliate agreements, third parties refer prospects to our web site, and we pay the third parties when the customer completes the customer registration process, or in some cases, upon the first successful billing of a customer. We record these expenses on a monthly basis as prospects are successfully converted to customers. Under Internet search advertising, we record expenses based on actual “click activity” on our displayed advertisements following targeted key word searches.
Inventories consist of finished products sold through our supplies store and are accounted for using the lower of cost (first-in, first-out method) or market. Inventories reported as a component of other current assets in both 2016 and 2015 were $3.5 million.
Net income (loss) per share represents net income (loss) attributable to common stockholders divided by the weighted average number of common shares outstanding during a reported period. The diluted net income (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock, including stock options, (commonly and hereafter referred to as “common stock equivalents”), were exercised or converted into common stock. Diluted net income (loss) per share is calculated by dividing net income (loss) during a reported period by the sum of the weighted average number of common shares outstanding plus common stock equivalents for the period.
The following table reconciles share amounts utilized to calculate basic and diluted net income (loss) per share (in thousands, except per share data):
STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The calculation of dilutive shares excludes the effect of the following options that are considered anti-dilutive (in thousands):
|
|
Year ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Anti-dilutive stock options
|
|
|
211
|
|
|
|
3,596
|
|
|
|
134
|
|
Property and Equipment
We account for property and equipment at cost less accumulated depreciation and amortization. We compute depreciation using the straight-line method over the estimated useful life of the asset, generally three to five years for furniture, fixtures and equipment and ten to forty years for building and building improvements. We have a policy of capitalizing expenditures that materially increase assets’ useful lives and charging ordinary maintenance and repairs to operations as incurred. When property or equipment is disposed of, the cost and related accumulated depreciation and amortization are removed, and any gain or loss is included in operations.
Research and Development Costs
Research and development expense principally consists of compensation and related expenses for personnel involved in the development of our services, depreciation of equipment and software and expenditures for consulting services and third party software.
Revenue Recognition
We recognize revenue from product sales or services rendered, as well as commissions from advertising or sale of products by third party vendors to our customer base when the following four revenue recognition criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the selling price is fixed or determinable, and collectability is reasonably assured.
We earn service revenue in several different ways: (1) customers may pay us a monthly fee based on a subscription plan; (2) customers may qualify under our USPS partnership to have their service fees waived or refunded and then we are compensated directly by the USPS; (3) we may earn transaction related revenue based on customers purchasing postage or printing shipping labels; (4) we may earn compensation by offering customers a discounted postage rate that is provided to the customers by our integration partners; and (5) we may earn other types of revenue shares or other compensation from specific customers or integration partner, and is recognized in the period that services are provided.
Customers purchase postage from the USPS through our mailing and shipping solutions. Postage purchase funds that are transferred directly from the customers to the USPS are not recognized as revenue for this postage, as it is purchased by our customers directly from the USPS.
Customized postage revenue, which includes the face value of postage, from the sale of PhotoStamps and PictureItPostage sheets and rolls is made pursuant to a sales contract that provides for transfer of both title and risk of loss upon our delivery to the carrier and revenue is recognized at that time.
On a limited basis, we allow third parties to offer products and promotions to our customer base. These arrangements generally provide payment in the form of a flat fee or revenue sharing arrangements where we receive payment upon customers accessing third party products and services. Total revenue from such advertising arrangements was not significant during 2016, 2015 and 2014.
STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
We provide our customers with the opportunity to purchase parcel insurance directly through our solutions. Insurance revenue represents the gross amount charged to the customer for purchasing insurance and the related cost represents the amount paid to our insurance providers. We recognize revenue on insurance purchases upon the ship date of the insured package.
Sales and Marketing
Sales and marketing expense principally consists of spending to acquire new customers and compensation and related expenses for personnel engaged in sales, marketing, and business development activities. Ongoing marketing programs include the following: traditional advertising, partnerships, customer referral programs, customer re-marketing efforts, telemarketing, direct sales, direct mail, and online advertising.
Segment Information
We operate in a single reportable segment, “Internet Mailing and Shipping Solutions.”
Operating segments are defined as components of an enterprise for which discrete financial information is available that is evaluated regularly by the chief operating decision maker ("CODM") for purposes of allocating resources and evaluating financial performance.
The Company's Chief Executive Officer has been identified as the CODM as defined by guidance regarding segment disclosures.
In 2015, we completed the reassessment of our segment reporting in light of our Endicia acquisition. Based on this reassessment, we identified two operating segments
in accordance with ASC 280-10-50-1 through 50-9,
Segment Reporting
, consisting of Endicia and the remaining consolidated company. Although the primary business activities for both operating segments consisted of providing Internet-based mailing and shipping solutions, each operating segment had discrete financial information available and our Chief Executive Officer, in his capacity as the CODM, reviewed
the financial and operating metrics for the Endicia operating segment separately from those of the rest of the Company to inform resource allocation decisions and to assess performance.
The primary purpose of the CODM reviewing Endicia’s financial information was to inform resource allocation decisions relating to achieving potential acquisition related synergies including the following areas: (1) cost reductions for compensation and related expenses associated with duplicative personnel; (2) the planned level of sales and marketing spend; and (3) cost reductions from elimination of duplicative operational expenses and vendors.
We aggregated operating segments into one reportable segment in accordance with ASC 280-10-50-11, because we concluded that: (1) both operating segments had similar economic characteristics; (2) both operating segments had similar products, production processes, customers, distribution methods and regulatory environments; and (3) aggregation would be consistent with the objectives and basic principles of ASC 280. As our one aggregated operating segment accounted for 100% of our revenue, net income and assets, it constituted our sole reportable segment in 2015.
In 2016, we substantially realized the previously identified synergies and merged Endicia’s operations and employee groups into the existing consolidated structure which resulted in the CODM no longer needing to review Endicia’s performance and financial information separately. As a result, the Company's CODM now reviews the financial information presented on a consolidated basis for purposes of allocating resources and evaluating performance. Based on our evaluation in accordance with ASC 280, including consideration of the ShippingEasy acquisition, we concluded that we had one operating segment in 2016.
As our one operating segment accounted for 100% of our revenue, net income and assets, it constituted our sole reportable segment in 2016.
STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In 2014, all of our operations, revenue and assets were within the United States. In 2015 and 2016, primarily as a result of our Endicia acquisition, we had international revenue and assets that were less than 1% of total revenue and assets with the remainder in the United States.
During 2016, 2015 and 2014, we did not recognize revenue from any one customer that represented 10% or more of revenues.
Short- Term Financing Obligations
We utilize short-term financing, which is separate from our debt as described in
Note – 7 “Debt,”
to fund certain Company operations. Short-term financing is included in accrued expenses. As of December 31, 2016 we had $15.6 million in short-term financing obligations and $90.0 million of unused credit. As of December 31, 2015 we had $13.3 million in short-term financing obligations and $34.2 million of unused credit.
Stock-Based Compensation
We estimate the fair value of share-based payment awards on the date of grant using an option-pricing model and recognize stock-based compensation expense during each period based on the value of that portion of share-based payment awards that is ultimately expected to vest during the period, reduced for estimated forfeitures. We estimate forfeitures at the time of grant based on historical data and revise, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Compensation expense recognized for all employee stock options granted is recognized using the straight-line method over their respective vesting periods of up to five years. Starting in the third quarter of 2016, our stock-based compensation expense included performance based inducement equity awards relating to the ShippingEasy acquisition as described in
Note 3 - Acquisitions
.
The following table sets forth the stock-based compensation expense that we recognized for the periods indicated (in thousands):
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Stock-based compensation expense relating to:
|
|
|
|
|
|
|
|
|
|
Employee and director stock options
|
|
$
|
32,891
|
|
|
$
|
16,644
|
|
|
$
|
4,473
|
|
Employee stock purchases
|
|
|
1,058
|
|
|
|
582
|
|
|
|
326
|
|
Total stock-based compensation expense
|
|
$
|
33,949
|
(2)
|
|
$
|
17,226
|
(1)
|
|
$
|
4,799
|
|
Stock-based compensation expense relating to:
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
$
|
1,828
|
|
|
$
|
995
|
|
|
$
|
402
|
|
Sales and marketing
|
|
|
7,194
|
|
|
|
4,549
|
|
|
|
955
|
|
Research and development
|
|
|
6,633
|
|
|
|
3,149
|
|
|
|
998
|
|
General and administrative
|
|
|
18,294
|
|
|
|
8,533
|
|
|
|
2,444
|
|
Total stock-based compensation expense
|
|
$
|
33,949
|
(2)
|
|
$
|
17,226
|
(1)
|
|
$
|
4,799
|
|
(1)
|
Included in this amount is $1.3 million of stock-based compensation expense relating to the change in the fair value of our contingent consideration liability in connection with our acquisition of ShipStation. See
Note - 3 “Acquisitions.”
|
(2)
|
Included in this amount is $1.9 million of stock-based compensation expense relating to performance based equity awards granted in connection with our acquisition of ShippingEasy. See
Note - 3 “Acquisitions.”
|
STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
We use the Black-Scholes-Merton option valuation model to estimate the fair value of share-based payment awards on the date of grant, which requires us to make a number of highly complex and subjective assumptions, including stock price volatility, expected term, risk-free interest rates and projected employee stock option exercise behaviors. In the case of options we grant, our assumption of expected volatility is based on the historical volatility of our stock price over the term equal to the expected life of the options. We base the risk-free interest rate on U.S. Treasury zero-coupon issues with a remaining term equal to the expected life of the options assumed at the date of grant. The estimated expected life represents the weighted-average period the stock options are expected to remain outstanding, determined based on an analysis of historical exercise behavior.
The following are the weighted average assumptions used in the Black-Scholes valuation model for the periods indicated:
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Expected dividend yield
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Risk-free interest rate
|
|
|
0.99
|
%
|
|
|
1.00
|
%
|
|
|
0.87
|
%
|
Expected volatility
|
|
|
48
|
%
|
|
|
46
|
%
|
|
|
50
|
%
|
Expected life (in years)
|
|
|
3.4
|
|
|
|
3.4
|
|
|
|
3.5
|
|
Expected forfeiture rate
|
|
|
6
|
%
|
|
|
6
|
%
|
|
|
6
|
%
|
We elected to utilize the alternative transition method for calculating the tax effects of stock-based compensation. The alternative transition method includes computational guidance to establish the beginning balance of the additional paid-in capital pool (“APIC Pool”) related to the tax effects of employee stock-based compensation, and a simplified method to determine the subsequent impact on the APIC Pool for employee stock-based compensation awards that are vested and outstanding upon adoption of FASB ASC Topic No. 718 Compensation – Stock Compensation (“ASC 718”). A tax benefit will be recorded in additional paid-in capital when these deductions reduce our future income taxes payable.
Trademarks, Patents and Intangible Assets
Acquired trademarks, patents and other intangibles include both amortizable and non-amortizable assets and are included in intangible assets, net in the accompanying consolidated balance sheets. Intangible assets are carried at cost less accumulated amortization. Cost associated with internally developed intangible assets is typically expensed as incurred as research and development costs. Amortization of amortizable intangible assets is calculated on a straight-line basis, which is consistent with the expected future cash flows.
Treasury
Stock
During 2016 and 2014, we repurchased approximately 844,000 shares and 435,000 shares for $80.6 million and $12.9 million, respectively. We did not repurchase shares in 2015.
Website Development Costs
We develop and maintain our website. Costs associated with the operation of our website consist primarily of software and hardware purchased from third parties and administrative costs relating to the maintenance and development of the website. Costs related to the purchase of software and hardware are capitalized based on our property and equipment capitalization policy. These capitalized costs are amortized based on their estimated useful life. Administrative costs related to the maintenance and development of our website are expensed as incurred.
STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Recent Accounting Pronouncements
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09") an updated standard on revenue recognition. This ASU will supersede the revenue recognition requirements in Accounting Standards Codification Topic 605, Revenue Recognition, and most industry-specific guidance. ASU 2014-09 provides enhancements to the quality and consistency of how revenue is reported while also improving comparability in the financial statements of companies reporting using US GAAP and International Financial Reporting Standards. The core principle of the new standard is for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so the companies may be required to use more judgment and make more estimates than under current authoritative guidance. ASU 2014-09 will be effective for the Company in the first quarter of fiscal 2018 and may be applied on a full retrospective or modified retrospective approach. The Company has reviewed the ASU 2014-09 updated standard on revenue recognition. The Company is currently in the process of reviewing its material contracts to assess the impact of the new standard. While the Company has performed a review of the impact on certain contracts, it has not completed a review of all material contracts. As a result, the Company is currently still in the process of evaluating the adoption method and the impact the adoption of this standard will have on its consolidated financial statements.
In February 2016, the FASB issued a new accounting standard for leases. The new standard generally requires the recognition of financing and operating lease liabilities and corresponding right-of-use assets on the balance sheet. For financing leases, a lessee recognizes amortization of the right-of-use asset as an operating expense over the lease term separately from interest on the lease liability. For operating leases, a lessee recognizes its total lease expense as an operating expense over the lease term. The amendments are effective for the Company in the first quarter of 2019 using a modified retrospective approach with early adoption permitted. The Company is currently evaluating the impact the adoption of this standard will have on its consolidated financial statements.
In March 2016, the FASB simplified certain areas of accounting for stock-based compensation, including accounting for the income tax consequences of stock-based compensation, determining the classification of awards as either equity or liabilities, classifying certain items within the statement of cash flows and introducing an accounting policy election to account for forfeitures of non-vested awards as they occur. The simplified guidance is effective for the Company in the first quarter of 2017. Depending on the area simplified, the guidance is effective either prospectively, retrospectively or using a modified retrospective approach. Early adoption is permitted. The adoption of this standard will not have a material impact on our consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, a standard which simplifies the accounting for goodwill impairment. The guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The revised guidance will be applied prospectively, and is effective for the Company in the first quarter of 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company is evaluating the effect this new standard will have on its financial statements.
We have accounted for all of our acquisitions under the acquisition method of accounting in accordance with the provisions of FASB ASC Topic No. 805
Business Combinations
(“ASC 805”).
ShippingEasy Acquisition
On July 1, 2016, we completed our acquisition of ShippingEasy Group, Inc. (“ShippingEasy”) when our wholly owned subsidiary was merged with and into ShippingEasy, resulting in our 100% ownership of ShippingEasy. The merger agreement provided for us to pay $55.0 million in aggregate merger consideration to the former owners of ShippingEasy, payable in cash. The purchase price was subject to adjustments for changes in ShippingEasy’s net working capital. The net purchase price including adjustments for net working capital totaled approximately $55.4 million and was funded from current cash and investment balances.
STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In connection with the acquisition, we issued performance based inducement equity awards to each of the General Manager and Chief Technology Officer of ShippingEasy. These inducement awards cover an aggregate of up to 43,567 common shares each if earnings targets for ShippingEasy are achieved over a two and one-half year period beginning July 1, 2016. The two and one-half year period is divided into three phases consisting of the six months ended December 31, 2016 and each of the twelve months ended December 31, 2017 and 2018. The awards are subject to proration if at least 75% of the applicable target is achieved and are subject to forfeiture or acceleration based on changes in employment circumstances over the performance period. The stock-based compensation expense associated with the performance based inducement equity award will be recognized ratably over each phase based on the estimated probable achievement of each financial target. The awards are a material inducement to the General Manager and Chief Technology Officer entering into employment agreements with Stamps.com in connection with the acquisition of ShippingEasy. We determined the achievement of 100% of the earnings target for the six months ended December 31, 2016 was met, therefore, we recognized approximately $1.9 million of stock-based compensation expense, representing 21,783 shares, for these inducement equity awards during the six months ended December 31, 2016. The $1.9 million stock-based compensation expense recognized represents 100% of the total performance based inducement equity award for the first phase. The equity award for the first phase will be issued in the first quarter of 2017.
We also issued inducement stock option grants for an aggregate of approximately 62,000 shares of Stamps.com common stock to 48 new employees in connection with our acquisition of ShippingEasy. Each option vests 25% on the one year anniversary of the July 1, 2016 grant date with the remaining 75% vesting in approximately equal monthly increments over the immediately succeeding thirty-six months provided that the option holder is still employed by the Company on the vesting dates. The stock options have a ten year term and an exercise price equal to the closing price of Stamps.com common stock on the grant date of July 1, 2016. The stock options were granted as inducements material to the new employees entering into employment with Stamps.com in connection with the acquisition of ShippingEasy. The related stock-based compensation expense we recognized in 2016 was not material.
STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The total net purchase price for the ShippingEasy acquisition was allocated to the assets acquired and the liabilities assumed based on their fair values. We have made significant estimates and assumptions in determining the allocation of the purchase price. The allocation of purchase consideration was subject to change based on finalizing the deferred tax liability and the valuation of the intangible assets as of the date of acquisition. During the fourth quarter of 2016, as a result of the finalization of the purchase price allocation, $173,000 was allocated to increase the deferred tax liability and goodwill balances. There were no changes to the valuation of intangible assets. The following table is the final allocation of the purchase price (in thousands, except years):
|
|
Fair Value
|
|
|
Fair Value
|
|
|
Useful Life
(In Years)
|
|
|
Weighted
Average
Estimated
Useful Life
(In Years)
|
|
Trade accounts receivable
|
|
$
|
1,194
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
76
|
|
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
40,953
|
|
|
|
|
|
|
|
|
|
|
Identifiable intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade name
|
|
|
|
|
|
$
|
1,304
|
|
|
8
|
|
|
|
|
Developed technology
|
|
|
|
|
|
|
6,948
|
|
|
5
|
|
|
|
|
Customer relationships
|
|
|
|
|
|
|
6,316
|
|
|
5
|
|
|
|
|
Non-compete agreements
|
|
|
|
|
|
|
1,111
|
|
|
3 to 5
|
|
|
|
|
Total identifiable intangible assets
|
|
|
15,679
|
|
|
|
|
|
|
|
|
|
|
5
|
|
Accrued expenses and other liabilities
|
|
|
(707
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue
|
|
|
(185
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liability
|
|
|
(1,603
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total purchase price
|
|
|
55,447
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: settlement of preexisting relationship (accounts receivable)
|
|
|
1,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase price, net of settlement
|
|
$
|
54, 253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill represents the excess of the fair value of consideration given over the fair value of the tangible assets, identifiable intangible assets and liabilities assumed in a business combination and the potential acquisition related synergies. Such synergies include leveraging Stamps.com’s resources, personnel, expertise and capital to grow ShippingEasy’s revenue faster than it otherwise would have as a standalone Company. The identified intangible assets consist of trade names, developed technology, non-compete agreements and customer relationships. The estimated fair values of the trademark and developed technology were determined using the “relief from royalty” method. The estimated fair value of the non-compete agreements was determined using the “with and without” method. The estimated fair value of customer relationships was determined using the “excess earnings” method. The rate utilized to discount net cash flows to their present values was approximately 23% and was determined after consideration of the overall enterprise rate of return and the relative risk and importance of the assets to the generation of future cash flows. Trademark, developed technology, non-compete and customer relationships are each amortized on a straight-line basis over their estimated useful lives. The amortization of acquired intangibles will be approximately $761,000 per quarter for the remaining estimated useful lives. The intangible assets and goodwill recorded in this acquisition are not deductible for tax purposes.
Endicia Acquisition
On March 22, 2015, we entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with Endicia, and Newell Rubbermaid Inc., a Delaware corporation (“Newell”). The Stock Purchase Agreement provided for our purchase of all of the issued and outstanding shares of common stock of Endicia from a wholly owned indirect subsidiary of Newell for an aggregate purchase price of $215 million in cash (the “Transaction”). The purchase price was subject to adjustment for changes in Endicia’s net working capital as of the date of the closing of the Transaction and certain transaction expenses and closing cash adjustments. After receiving regulatory clearance, we closed the Transaction on November 18, 2015.
As part of the funding of our acquisition of Endicia, we entered into a credit agreement with a group of banks on November 18, 2015, which provided for a term loan of $82.5 million and a revolving credit facility with a maximum borrowing of $82.5 million (collectively, the “Credit Agreement”) to fund our acquisition of Endicia. The Credit Agreement is secured by substantially all of our assets. We funded our acquisition with cash of $56.5 million and debt from our Credit Agreement of $164.5 million, totaling $221.0 million. The $221.0 million consisted of the following: 1) purchase price of $214.2 million; 2) $1.5 million of debt issuance costs; and 3) the transfer of Endicia’s ending cash balance on November 17, 2015 of $5.3 million. Total debt issuance costs of $1.8 million, which included $300,000 of costs incurred prior to closing, were recorded as debt discount and are being accreted as interest expense over the life of the Credit Agreement. Our Credit Agreement matures on November 18, 2020.
STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
As of December 31, 2016 our outstanding debt under the Credit Agreement, gross of debt issuance costs, was approximately $76.8 million under the term loan and approximately $72.0 million under the revolving credit facility. Because we have a letter of credit of approximately $510,000 relating to a facility lease, we have approximately $10.0 million of available and unused borrowings under the revolving credit facility as of December 31, 2016.
See
Note 7 – “Debt.”
During the first quarter of 2016, we adjusted the purchase price allocation of Endicia which resulted in goodwill increasing by approximately $945,000 due to certain acquisition date balance sheet adjustments and the settlement of net working capital with Newell. The total estimated purchase price of the acquired company was allocated to the assets acquired and the liabilities assumed based on their fair values. We have made significant estimates and assumptions in determining the allocation of the purchase price. The following table sets forth the final allocation of the purchase price (in thousands, except years):
|
|
Fair Value
|
|
|
Fair Value
|
|
|
Useful Life
(In Years)
|
|
|
Weighted
Average
Estimated
Useful Life
(In Years)
|
|
Trade accounts receivable
|
|
$
|
10,247
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
771
|
|
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
2,798
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
131,860
|
|
|
|
|
|
|
|
|
|
|
Identifiable intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade name
|
|
|
|
|
|
$
|
10,900
|
|
|
Indefinite
|
|
|
|
|
Developed technology
|
|
|
|
|
|
|
26,100
|
|
|
9
|
|
|
|
|
Customer relationships
|
|
|
|
|
|
|
43,200
|
|
|
6
|
|
|
|
|
Total identifiable intangible assets
|
|
|
80,200
|
|
|
|
|
|
|
|
|
|
|
7
|
|
Accrued expenses and other liabilities
|
|
|
(10,212
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue
|
|
|
(926
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total purchase price
|
|
$
|
214,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill represents the excess of the fair value of consideration given over the fair value of the tangible assets, identifiable intangible assets and liabilities assumed in a business combination and the potential synergy of combining the operations of Stamps.com and Endicia. Such synergies include estimated cost reductions and enhanced sales and customer support which are expected to drive increased volume. The entire amount of goodwill recorded in this acquisition is being deducted for tax purposes ratably over a 15 year period. The identified intangible assets consist of trade name, developed technology and customer relationships. The estimated fair values of the trade name and developed technology were determined using the “relief from royalty” method. The estimated fair value of customer relationships was determined using the “excess earnings” method. The rate utilized to discount net cash flows to their present values was approximately 20% and was determined after consideration of the overall enterprise rate of return and the relative risk and importance of the assets to the generation of future cash flows. Developed technology and customer relationships is being amortized on a straight-line basis over their estimated useful lives. The amortization of acquired intangibles is approximately $2.5 million per quarter for the remaining estimated useful lives.
ShipWorks Acquisition
On August 29, 2014, we acquired 100% of the outstanding equity of Interapptive Inc., which operates ShipWorks, in a cash transaction.
STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The total purchase price for ShipWorks was approximately $22.1 million and was comprised of the following (in thousands):
|
|
Fair Value
|
|
Cash consideration
|
|
$
|
21,952
|
|
Deferred consideration
|
|
|
181
|
|
Total purchase price
|
|
$
|
22,133
|
|
The total purchase price of the acquired company was allocated to the assets acquired and the liabilities assumed based on their fair values. We have made significant estimates and assumptions in determining the allocation of the purchase price. During the fourth quarter of 2014, we adjusted the purchase price of ShipWorks by approximately $69,000. The following table sets forth the final allocation of the purchase price (in thousands, except years):
|
|
Fair Value
|
|
|
Fair Value
|
|
|
Useful Life
(In Years)
|
|
|
Weighted
Average
Estimated
Useful Life
(In Years)
|
|
Cash and cash equivalents
|
|
$
|
803
|
|
|
|
|
|
|
|
|
|
|
Trade accounts receivable
|
|
|
353
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
1,091
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
16,349
|
|
|
|
|
|
|
|
|
|
|
Identifiable intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademark
|
|
|
|
|
|
$
|
200
|
|
|
6
|
|
|
|
|
Developed technology
|
|
|
|
|
|
|
1,700
|
|
|
7
|
|
|
|
|
Non-compete agreement
|
|
|
|
|
|
|
700
|
|
|
4
|
|
|
|
|
Customer relationship
|
|
|
|
|
|
|
2,300
|
|
|
6
|
|
|
|
|
Total identifiable intangible assets
|
|
|
4,900
|
|
|
|
|
|
|
|
|
|
|
6
|
|
Accrued expenses and other liabilities
|
|
|
(1,119
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue
|
|
|
(265
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total purchase price
|
|
$
|
22,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill represents the excess of the fair value of consideration given over the fair value of the tangible assets, identifiable intangible assets and liabilities assumed in a business combination and the potential synergy of combining the operations of Stamps.com and ShipWorks. The entire amount of goodwill recorded in this acquisition is being deducted for tax purposes ratably over a 15 year period. The identified intangible assets consist of trademarks, developed technology, non-compete agreements and customer relationships. The estimated fair values of the trademark and developed technology were determined using the “relief from royalty” method. The estimated fair value of the non-compete was determined using the “with and without” method. The estimated fair value of customer relationship was determined using the “excess earnings” method. The rate utilized to discount net cash flows to their present values was approximately 13% and was determined after consideration of the overall enterprise rate of return and the relative risk and importance of the assets to the generation of future cash flows. Trademark, developed technology, non-compete and customer relationship is amortized on a straight-line basis over their estimated useful lives. The amortization of acquired intangibles is approximately $200,000 per quarter for the remaining estimated useful lives.
STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
ShipStation Acquisition and Contingent Consideration
On June 10, 2014, we acquired 100% of the outstanding equity of Auctane LLC, which operates ShipStation, in a cash and contingent stock transaction.
The total purchase price for ShipStation was approximately $66.2 million and was comprised of the following (in thousands, except shares):
|
|
Fair Value
|
|
Cash consideration
|
|
$
|
50,000
|
|
Fair value of performance linked earn-out of up to 768,900 shares of Stamps.com common stock (contingent consideration)
|
|
|
16,242
|
|
Total purchase price
|
|
$
|
66,242
|
|
The performance linked earn-out payment of Stamps.com shares (or contingent consideration) to former equity members of Auctane LLC was based on the achievement of certain financial measures within a time period subsequent to the acquisition. There were two periods in which the earn-out payment was calculated. The first earn-out period was based on the achievement of certain financial measures during the six months ended December 31, 2014. The second earn-out period was based on the achievement of certain financial measures during the twelve months ended December 31, 2015. The range of Stamps.com shares available for the performance linked earn-out for both periods was between 576,675 to 768,900 shares, provided that a minimum threshold for the financial measures was achieved. The first earn-out payment totaled 192,225 shares and was made in the first quarter of 2015. The second earn-out payment totaled 576,675 shares and was made in the first quarter of 2016. The fair value of the contingent consideration was determined at the acquisition date based on a probability weighted method, which incorporated management’s forecasts of financial measures and the likelihood of the financial measure targets being achieved using a series of options that replicate the pay-off structure of the earn-out, and the value of each of these options was determined using the Black-Scholes-Merton option pricing framework.
The total purchase price of the acquired company was allocated to the assets acquired and the liabilities assumed based on their fair values. We have made significant estimates and assumptions in determining the allocation of the purchase price. The following table is the allocation of the purchase price (in thousands, except years):
|
|
Fair Value
|
|
|
Fair Value
|
|
|
Useful Life
|
|
|
Weighted
Average
Estimated
Useful Life
(In Years)
|
|
Cash and cash equivalents
|
|
$
|
1,117
|
|
|
|
|
|
|
|
|
|
|
Trade accounts receivable
|
|
|
254
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
187
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
50,544
|
|
|
|
|
|
|
|
|
|
|
Identifiable intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trademark
|
|
|
|
|
|
$
|
500
|
|
|
4
|
|
|
|
|
Developed technology
|
|
|
|
|
|
|
5,300
|
|
|
8
|
|
|
|
|
Non-compete agreement
|
|
|
|
|
|
|
400
|
|
|
4
|
|
|
|
|
Customer relationship
|
|
|
|
|
|
|
9,000
|
|
|
8
|
|
|
|
|
Total identifiable intangible assets
|
|
|
15,200
|
|
|
|
|
|
|
|
|
|
|
8
|
|
Accrued expenses and other liabilities
|
|
|
(835
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue
|
|
|
(264
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total purchase price
|
|
$
|
66,242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Goodwill represents the excess of the fair value of consideration given over the fair value of the tangible assets, identifiable intangible assets and liabilities assumed in a business combination and the potential synergy of combining the operations of Stamps.com and ShipStation. The entire amount of goodwill recorded in this acquisition is being deducted for tax purposes ratably over a 15 year period. The identified intangible assets consist of trademarks, developed technology, non-compete agreements and customer relationships. The estimated fair values of the trademark and developed technology were determined using the “relief from royalty” method. The estimated fair value of the non-compete was determined using the “with and without” method. The estimated fair value of customer relationship was determined using the “excess earnings” method. The rate utilized to discount net cash flows to their present values was approximately 15% and was determined after consideration of the overall enterprise rate of return and the relative risk and importance of the assets to the generation of future cash flows. Trademark, developed technology, non-compete and customer relationship is amortized on a straight-line basis over their estimated useful lives. The amortization of acquired intangibles is approximately $500,000 per quarter for the remaining estimated useful lives.
Under ASC 805,
Business Combinations
, we are required to re-measure the fair value of the contingent consideration at each reporting period. As of December 31, 2015, the fair value of the contingent consideration was calculated by multiplying the expected earn-out shares to be distributed by our stock price at December 31, 2015. The fair value of the contingent consideration for the ShipStation acquisition was $63.2 million as of December 31, 2015, the final measurement date. No increases or decreases to the fair value of the contingent consideration were made following December 31, 2015 and prior to the second and final earn-out payment in the first quarter of 2016.
We incurred approximately $1.1 million, $4.4 million and $1.1 million in acquisition and integration related corporate development expenses during the years ended December 31, 2016, 2015 and 2014, respectively. These costs are included in general and administrative expense in our Consolidated Statements of Operations.
Pro-Forma Financial Information (unaudited)
The pro-forma information presented is for illustrative purposes only and is not necessarily indicative of the results of operations that would have been realized if the acquisition had been completed on the date indicated, nor is it indicative of future operating results. The pro-forma financial information does not include any adjustments for anticipated operating efficiencies or cost savings.
The following table presents the pro-forma financial information (in thousands, except per share amounts) and assumes the acquisition of ShippingEasy occurred on January 1, 2015:
|
|
Year Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
370,560
|
|
|
$
|
219,426
|
|
Income (loss) from operations
|
|
|
121,537
|
|
|
|
(9,138
|
)
|
Net income (loss)
|
|
|
75,810
|
|
|
|
(6,608
|
)
|
Basic earnings (loss) per share
|
|
$
|
4.40
|
|
|
$
|
(0.40
|
)
|
Diluted earnings (loss) per share
|
|
$
|
4.15
|
|
|
$
|
(0.40
|
)
(1)
|
(1)
|
Common stock equivalents are excluded from the diluted net loss per share calculation as their effect is anti-dilutive.
|
STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The following table presents the pro-forma financial information (in thousands, except per share amounts) and assumes the acquisition of Endicia occurred on January 1, 2014:
|
|
Year Ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
273,055
|
|
|
$
|
204,628
|
|
(Loss) income from operations
|
|
|
(7,657
|
)
|
|
|
20,820
|
|
Net (loss) income
|
|
|
(9,273
|
)
|
|
|
32,536
|
(1)
|
Basic (loss) earnings per share
|
|
$
|
(0.58
|
)
|
|
$
|
2.03
|
|
Diluted (loss) earnings per share
|
|
$
|
(0.58
|
)
(2)
|
|
$
|
1.98
|
|
(1)
|
Pro-forma net income of $32.5 million in 2014 includes valuation allowance releases of $13.6 million.
|
(2)
|
Common stock equivalents are excluded from the diluted net loss per share calculation as their effect is anti-dilutive.
|
The following table presents the pro-forma financial information (in thousands, except per share amounts) and assumes the acquisition of ShipStation and ShipWorks occurred on January 1, 2013. Contingent consideration charge of approximately $8.8 million recognized in 2014 is excluded from the pro-forma information below:
|
|
Year Ended December 31,
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
154,459
|
|
|
$
|
137,626
|
|
Income from operations
|
|
|
32,873
|
|
|
|
33,208
|
|
Net income
|
|
|
32,342
|
|
|
|
56,691
|
(1)
|
Basic earnings per share
|
|
$
|
2.02
|
|
|
$
|
3.61
|
|
Diluted earnings per share
|
|
$
|
1.97
|
|
|
$
|
3.48
|
|
(1)
|
Pro-forma net income of $56.7 million in 2013 includes valuation allowance releases of $13.6 million and $9.7 million recognized in 2014 and 2013, respectively.
|
4.
|
Goodwill and Intangible Assets
|
Goodwill represents the excess of the fair value of consideration given over the fair value of the tangible assets, identifiable intangible assets and liabilities assumed in business combinations.
The following tables summarize goodwill as of December 31, 2015 and 2016 (in thousands):
|
|
2015
|
|
Goodwill balance at December 31, 2014
|
|
$
|
66,893
|
|
Acquisitions (see
Note 3 – “Acquisitions”
)
|
|
|
130,914
|
|
Goodwill balance at December 31, 2015
|
|
$
|
197,807
|
|
|
|
|
2016
|
|
Goodwill balance at December 31, 2015
|
|
$
|
197,807
|
|
Purchase price adjustment (see
Note 3 – “Acquisitions”
)
|
|
|
945
|
|
Acquisition of ShippingEasy (see
Note 3 – “Acquisitions”
)
|
|
|
40,953
|
|
Goodwill balance at December 31, 2016
|
|
$
|
239,705
|
|
STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
We have amortizable and non-amortizable intangible assets consisting of patents, trademarks, trade names, developed technology, non-compete agreements,customer relationships and other totaling approximately $125.4 million and $109.7 million in gross carrying amount as of December 31, 2016 and 2015, respectively. Non-amortizable assets of $11.4 million consist primarily of trade name relating to the Endicia acquisition.
The following table summarizes our amortizable intangible assets as of December 31, 2016 (in thousands):
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net Carrying
Amount
|
|
Patents and Others
|
|
$
|
8,889
|
|
|
$
|
8,774
|
|
|
$
|
115
|
|
Customer Relationships
|
|
|
60,816
|
|
|
|
12,199
|
|
|
|
48,617
|
|
Technology
|
|
|
40,048
|
|
|
|
6,100
|
|
|
|
33,948
|
|
Non-Compete
|
|
|
2,211
|
|
|
|
777
|
|
|
|
1,434
|
|
Trademark
|
|
|
2,004
|
|
|
|
479
|
|
|
|
1,525
|
|
Total amortizable intangible assets at December 31, 2016
|
|
$
|
113,968
|
|
|
$
|
28,329
|
|
|
$
|
85,639
|
|
The following table summarizes our amortizable intangible assets as of December 31, 2015 (in thousands):
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net Carrying
Amount
|
|
Patents and Others
|
|
$
|
8,889
|
|
|
$
|
8,729
|
|
|
$
|
160
|
|
Customer Relationships
|
|
|
54,500
|
|
|
|
2,773
|
|
|
|
51,727
|
|
Technology
|
|
|
33,100
|
|
|
|
1,598
|
|
|
|
31,502
|
|
Non-Compete
|
|
|
1,100
|
|
|
|
389
|
|
|
|
711
|
|
Trademark
|
|
|
700
|
|
|
|
239
|
|
|
|
461
|
|
Total amortizable intangible assets at December 31, 2015
|
|
$
|
98,289
|
|
|
$
|
13,728
|
|
|
$
|
84,561
|
|
We recorded amortization of intangible assets totaling approximately $14.6 million, $3.8 million and $1.6 million for the years ended December 31, 2016, 2015 and 2014, respectively, which is included in general and administrative expense in our accompanying consolidated statements of operations.
As of December 31, 2016, the remaining weighted average amortization period for our amortizable intangible assets is approximately 6 years. Our estimated amortization expense for the next five years and thereafter is as follows (in thousands):
Year Ending December 31,
|
|
Estimated
Amortization
Expense
|
|
2017
|
|
$
|
16,038
|
|
2018
|
|
|
15,854
|
|
2019
|
|
|
15,608
|
|
2020
|
|
|
15,440
|
|
2021
|
|
|
13,040
|
|
Thereafter
|
|
|
9,659
|
|
Total
|
|
$
|
85,639
|
|
STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
5.
|
Cash, Cash Equivalents and Investments
|
Our cash equivalents and investments consist of money market, asset-backed securities and public corporate debt securities at December 31, 2016 and 2015. We consider all highly liquid investments with an original or remaining maturity of three months or less at the date of purchase to be cash equivalents. All of our investments are classified as available for sale and are recorded at market value using the specific identification method. Realized gains and losses are reflected in other income, net using the specific identification method. There was no material unrealized or realized gain or loss with respect to our investments during 2016, 2015 and 2014. Unrealized gains and losses are included as a separate component of stockholders' equity. We do not intend to sell investments with an amortized cost basis exceeding fair value and it is not likely that we will be required to sell the investments before recovery of their amortized cost bases.
On at least a quarterly basis, we evaluate our available for sale securities and record an “other-than-temporary impairment” (“OTTI”) if we believe their fair value is less than historical cost and it is probable that we will not collect all contractual cash flows. We did not record any OTTI during 2016, 2015 and 2014 after evaluating a number of factors including, but not limited to: (1) how much fair value has declined below amortized cost; (2) the financial condition of the issuers; (3) significant rating agency changes on the issuers; and (4) our intent and ability to hold the security for a period of time sufficient to allow for any anticipated recovery in fair value
The following tables summarize our cash, cash equivalents, and investments as of December 31, 2016 and 2015 (in thousands):
|
|
December 31, 2016
|
|
|
|
Cost or
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Estimated
Fair Value
|
|
|
|
Cash and cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
101,987
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
101,987
|
|
Money market
|
|
|
4,945
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,945
|
|
Total cash and cash equivalents
|
|
|
106,932
|
|
|
|
—
|
|
|
|
—
|
|
|
|
106,932
|
|
Short-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds and asset backed securities
|
|
|
1,500
|
|
|
|
13
|
|
|
|
(2
|
)
|
|
|
1,511
|
|
Total short-term investments
|
|
|
1,500
|
|
|
|
13
|
|
|
|
(2
|
)
|
|
|
1,511
|
|
Long-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds and asset backed securities
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total long-term investments
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Cash, cash equivalents and investments
|
|
$
|
108,432
|
|
|
|
13
|
|
|
|
(2
|
)
|
|
$
|
108,443
|
|
STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
|
|
December 31, 2015
|
|
|
|
Cost or
Amortized
Cost
|
|
|
Gross
Unrealized
Gains
|
|
|
Gross
Unrealized
Losses
|
|
|
Estimated
Fair Value
|
|
Cash and cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
63,593
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
63,593
|
|
Money market
|
|
|
1,533
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,533
|
|
Total cash and cash equivalents
|
|
|
65,126
|
|
|
|
—
|
|
|
|
—
|
|
|
|
65,126
|
|
Short-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds and asset backed securities
|
|
|
8,549
|
|
|
|
7
|
|
|
|
(3
|
)
|
|
|
8,553
|
|
Total short-term investments
|
|
|
8,549
|
|
|
|
7
|
|
|
|
(3
|
)
|
|
|
8,553
|
|
Long-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds and asset backed securities
|
|
|
1,515
|
|
|
|
17
|
|
|
|
(3
|
)
|
|
|
1,529
|
|
Total long-term investments
|
|
|
1,515
|
|
|
|
17
|
|
|
|
(3
|
)
|
|
|
1,529
|
|
Cash, cash equivalents and investments
|
|
$
|
75,190
|
|
|
|
24
|
|
|
|
(6
|
)
|
|
$
|
75,208
|
|
The following table summarizes contractual maturities of our marketable fixed-income securities as of December 31, 2016 (in thousands):
|
|
|
|
|
|
|
Due within one year
|
|
$
|
1,500
|
|
|
$
|
1,511
|
|
Due after one year
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
1,500
|
|
|
$
|
1,511
|
|
6.
|
Fair Value Measurements
|
Financial assets measured at fair value on a recurring basis are classified in one of the three following categories, which are described below:
Level 1 -
|
Valuations based on unadjusted quoted prices for identical assets in an active market
|
Level 2 -
|
Valuations based on quoted prices in markets where trading occurs infrequently or whose values are based on quoted prices of instruments with similar attributes in active markets
|
Level 3 -
|
Valuations based on inputs that are unobservable and involve management judgment and our own assumptions about market participants and pricing
|
The following tables summarize our financial assets measured at fair value on a recurring basis as of December 31, 2016 and 2015 (in thousands):
|
|
|
|
|
Fair Value Measurement at Reporting Date Using
|
|
Description
|
|
December 31,
2016
|
|
|
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents
|
|
$
|
106,932
|
|
|
$
|
106,932
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Available-for-sale debt securities
|
|
|
1,511
|
|
|
|
—
|
|
|
|
1,511
|
|
|
|
—
|
|
Total
|
|
$
|
108,443
|
|
|
$
|
106,932
|
|
|
$
|
1,511
|
|
|
$
|
—
|
|
STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
|
|
|
|
|
Fair Value Measurement at Reporting Date Using
|
|
Description
|
|
December 31,
2015
|
|
|
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents
|
|
$
|
65,126
|
|
|
$
|
65,126
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Available-for-sale debt securities
|
|
|
10,082
|
|
|
|
—
|
|
|
|
10,082
|
|
|
|
—
|
|
Total
|
|
$
|
75,208
|
|
|
$
|
65,126
|
|
|
$
|
10,082
|
|
|
$
|
—
|
|
The fair value of our available-for-sale debt securities included in the Level 2 category is based on the market values obtained from an independent pricing service that were evaluated using pricing models that vary by asset class and may incorporate available trade, bid and other market information and price quotes from well-established independent pricing vendors and broker-dealers.
As of December 31, 2015 we had $63.2 million of contingent consideration relating to our acquisition of ShipStation that was required to be measured at fair value using quoted prices in active markets (level 1) because the contingencies had been resolved as of that date.
The following table summarizes our contingent consideration measured at fair value on a recurring basis (in thousands):
|
|
|
|
|
Fair Value Measurement at Reporting Date Using
|
|
|
|
December 31,
2015
|
|
|
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration – current
|
|
$
|
63,209
|
|
|
$
|
63,209
|
|
|
$
|
—
|
|
|
$
|
—
|
|
The following table represents a reconciliation of contingent consideration obligation measured on a recurring basis using significant unobservable inputs (level 3) as of December 31, 2014 and then transferred to quoted prices in active markets (level 1) as of December 31, 2015 (in thousands):
|
|
2015
|
|
|
|
|
|
Beginning of year balance
|
|
$
|
25,015
|
|
Contingent consideration distribution
|
|
|
(9,225
|
)
|
Contingent consideration charges
(1)
|
|
|
46,088
|
|
Contingent consideration compensation expense
(1)
|
|
|
1,331
|
|
End of year balance
|
|
$
|
63,209
|
|
The contingent consideration of $63.2 million was distributed in the first quarter of 2016. As of December 31, 2016, we had no contingent consideration.
(1)
|
This amount represents fair value adjustment during the year to contingent consideration recorded associated with the acquisition of ShipStation. The $46.1 million contingent consideration charge is recorded as a separate line item in our consolidated statement of income. The $1.3 million contingent consideration charge relating to certain employees is recorded in general and administrative expense in operating expense. See Note 3 – “Acquisitions” for further description. At December 31, 2015, the contingent consideration obligation was transferred from level 3 to level 1.
|
STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
On November 18, 2015, we entered into a Credit Agreement with a group of banks, which provides for a term loan of $82.5 million and a revolving credit facility with a maximum borrowing of $82.5 million. Our Credit Agreement matures on November 18, 2020. In connection with entering into the Credit Agreement, we incurred approximately $1.8 million in debt issuance costs which were recorded as debt discount and are being accreted as interest expense over the life of the Credit Agreement. Amortization expense associated with the debt issuance costs was approximately $373,000 and $31,000 for the years ended December 31, 2016 and 2015, respectively.
As of December 31, 2016 our outstanding debt under the Credit Agreement, gross of debt issuance costs, was approximately $76.8 million under our term loan and approximately $72.0 million under our revolving credit facility. Because we have a letter of credit of approximately $510,000 relating to a facility lease, we have approximately $10.0 million of available and unused borrowings under the revolving credit facility as of December 31, 2016.
Borrowings under the term loan are payable in quarterly installments which began on December 31, 2015. We pay interest on our Credit Agreement equal to the London Interbank Offered Rate plus an applicable margin, between 1.25% to 2.00%, based upon certain financial measures. As of December 31, 2016, our applicable margin was 1.25% and the interest rate on our outstanding loan was approximately 2.13%. We are subject to certain customary quarterly financial covenants under our Credit Agreement such as a maximum total leverage ratio and a minimum fixed charge coverage ratio. As of December 31, 2016, we were in compliance with the covenants of the Credit Agreement.
The Credit Agreement includes negative covenants, subject to exceptions, restricting or limiting our ability to among other things, incur additional indebtedness, grant liens, repurchase stock, pay dividends and engage in certain investment, acquisition and disposition transactions. The Credit Agreement imposes certain requirements in order for us to make dividend payments. As of December 31, 2016, such requirements were: (i) our Consolidated Total Leverage Ratio, as defined in the Credit Agreement, must be less than 2.75 to 1.00; (ii) our Fixed Charge Coverage Ratio, as defined in the Credit Agreement, must be greater than 1.25 to 1.00; and (iii) our Liquidity as defined in the Credit Agreement must be greater than $20 million. As of December 31, 2016, our Consolidated Total Leverage Ratio was 0.86 to 1.00, our Fixed Charge Coverage Ratio was 22.11 to 1.00 and our Liquidity was approximately $117 million. Based on our actual financial condition and results of operations, we do not believe that the provisions of the Credit Agreement currently represent a restriction to our ability to pay dividends in permissible amounts.
STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The contractual maturities of our debt obligations due subsequent to December 31, 2016 are as follows (in thousands):
|
|
Amount
|
|
2017
|
|
$
|
6,703
|
|
2018
|
|
|
8,766
|
|
2019
|
|
|
10,828
|
|
2020
|
|
|
122,521
|
|
2021
|
|
|
—
|
|
Total debt
|
|
|
148,818
|
|
|
|
|
|
|
Less debt issuance costs
|
|
|
1,465
|
|
Total debt, net of debt issuance costs
|
|
$
|
147,353
|
|
8.
|
Accounts Payable and Accrued Expenses
|
The following table summarizes our accounts payable and accrued expenses as of December 31, 2016 and 2015 (in thousands):
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Payroll and related accrual
|
|
$
|
15,168
|
|
|
$
|
12,863
|
|
Cost of revenue, inventory and materials accrual
|
|
|
977
|
|
|
|
539
|
|
Construction and facility expense accrual
|
|
|
1,899
|
|
|
|
649
|
|
Professional fees accrual
|
|
|
3,802
|
|
|
|
1,973
|
|
Sales and marketing related accrual
|
|
|
6,001
|
|
|
|
5,145
|
|
Operating expenses related accrual
|
|
|
35,285
|
|
|
|
15,613
|
|
Short-term financing obligations
|
|
|
15,554
|
|
|
|
13,313
|
|
Other accruals
|
|
|
7,519
|
|
|
|
10,721
|
|
Accounts payable and accrued expenses
|
|
$
|
86,205
|
|
|
$
|
60,816
|
|
9.
|
Property and Equipment
|
Property and equipment is summarized as follows (in thousands):
|
|
2016
|
|
|
2015
|
|
Land
|
|
$
|
7,156
|
|
|
$
|
7,156
|
|
Building
|
|
|
4,886
|
|
|
|
4,886
|
|
Building improvements
|
|
|
17,705
|
|
|
|
14,048
|
|
Leasehold improvements
|
|
|
2,003
|
|
|
|
1,055
|
|
Furniture and equipment
|
|
|
2,509
|
|
|
|
2,016
|
|
Computers and software
|
|
|
22,740
|
|
|
|
18,920
|
|
|
|
|
56,999
|
|
|
|
48,081
|
|
Less accumulated depreciation and amortization
|
|
|
(20,170
|
)
|
|
|
(16,374
|
)
|
Property and equipment, net
|
|
$
|
36,829
|
|
|
$
|
31,707
|
|
During 2016, 2015 and 2014, depreciation expense was approximately $4.6 million, $3.9 million and $3.2 million, respectively.
STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In 2016, our net income tax expense of $41.7 million consisted of current income tax expense consisting of federal alternative minimum tax and various state taxes and deferred income tax expense consisting of temporary tax items including contingent consideration, stock compensation and differences in the book and tax lives of amortizable intangibles. Our effective income tax rate differs from the statutory income tax rate primarily as a result of permanent tax adjustments for nondeductible items, research and development tax credits, and changes of state tax rates. We evaluated the appropriateness of our deferred tax assets and related valuation allowance in accordance with ASC 740 based on all available positive and negative evidence.
During 2016, we recorded current income tax expense for alternative minimum federal taxes and state taxes of $8.1 million and deferred income tax expense resulting from pre-tax book income which included temporary tax adjustments for net operating losses, contingent consideration obligation, stock-based compensation and amortization of definite-lived intangible assets as well as various state rate changes totaling approximately $33.6 million, totaling to a net income tax expense of $41.7 million. During 2015, we recorded current income tax expense for alternative minimum federal taxes and state taxes of $1.4 million and deferred income tax benefit resulting from pre-tax book losses which included temporary tax adjustments for contingent consideration obligation, stock-based compensation and amortization of definite-lived intangible assets as well as various federal and state rate changes totaling approximately $2.8 million, totaling to a net income tax benefit of $1.4 million. During 2014, we recorded current income tax expense for alternative minimum federal taxes and state taxes of $856,000 and deferred income tax benefit for the release of our valuation allowance totaling approximately $13.6 million, totaling to a net income tax benefit of $12.7 million.
As of December 31, 2016, we have approximately $48.8 million of net deferred tax assets and we do not have any valuation allowance. In determining that a valuation allowance was not necessary, we considered the available positive and negative evidence, including our recent earnings trend, expected future income and the federal and state effective tax rates related to the future income.
Under the guidance related to uncertain tax positions, we are required to determine whether it is more likely than not that a tax position will be sustained upon examination based on the technical merits of the position. A tax position that meets the more likely than not recognition threshold is measured to determine the amount of liability or benefit to recognize in the financial statements.
In accordance with the guidance we have evaluated our research and development tax credits for uncertain tax positions. As of December 31, 2016 we have research and development tax credit carryforwards totaling $10.3 million, net of unrecognized tax benefit for Federal and California purposes.
The following is a tabular reconciliation of the total amounts of unrecognized tax benefits for the years ended December 31, 2016, 2015 and 2014 (in thousands):
|
|
Unrecognized
Tax Benefits
|
|
Balance at December 31, 2013
|
|
$
|
(2,314
|
)
|
Addition for tax positions of prior years
|
|
|
(2,349
|
)
|
Addition for tax position of the current year
|
|
|
(560
|
)
|
Settlement
|
|
|
—
|
|
Balance at December 31, 2014
|
|
$
|
(5,223
|
)
|
Addition for tax positions of prior years
|
|
|
(251
|
)
|
Addition for tax position of the current year
|
|
|
(560
|
)
|
Settlement
|
|
|
—
|
|
Balance at December 31, 2015
|
|
$
|
(6,034
|
)
|
Additions for tax positions of prior years
|
|
|
(810
|
)
|
Reduction for tax positions of prior years
|
|
|
2,596
|
|
Additions for tax position of the current year
|
|
|
(2,156
|
)
|
Settlement
|
|
|
251
|
|
Balance at December 31, 2016
|
|
$
|
(6,153
|
)
|
STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Included in the balance of unrecognized tax benefits as of December 31, 2016, 2015, and 2014, are $6.2 million, $6 million, and $5.2 million, respectively, of tax benefits that, if recognized, would affect the effective tax rate.
Our policy is to recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense. There was no material interest or penalty expense during the years ended December 31, 2016, 2015 and 2014.
We believe that it is reasonably possible that a decrease of up to $2.6 million in unrecognized tax benefits related to state exposures may occur within the coming year.
We are subject to taxation in the U.S. and various state jurisdictions. We are subject to income tax examination by U.S. and state tax authorities for the calendar year ended December 31, 2013 and forward. However, to the extent allowed by law, the taxing authorities may have the right to examine prior periods where NOLs and credits were generated and carried forward, and make adjustments up to the amount of the NOLs and credits utilized in open tax years.
Our effective income tax rate differs from the statutory income tax rate primarily as a result of permanent tax adjustments for nondeductible items, research and development tax credits, and changes of state tax rates. The tax effect of temporary differences that give rise to a significant portion of the deferred tax assets and liabilities at December 31, 2016 and 2015 are presented below (in thousands):
|
|
2016
|
|
|
2015
|
|
Deferred tax assets:
|
|
|
|
|
|
|
Net operating loss carryforward
|
|
$
|
3,406
|
|
|
$
|
22,024
|
|
Tax credit carryforwards
|
|
|
16,091
|
|
|
|
6,872
|
|
Definite lived intangibles
|
|
|
200
|
|
|
|
2,946
|
|
Contingent consideration
|
|
|
20,461
|
|
|
|
20,742
|
|
Stock compensation
|
|
|
12,162
|
|
|
|
4,800
|
|
Accruals
|
|
|
7,771
|
|
|
|
3,534
|
|
Deferred tax assets
|
|
|
60,091
|
|
|
|
60,918
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Fixed assets
|
|
|
(726
|
)
|
|
|
(464
|
)
|
Indefinite lived intangibles
|
|
|
(7,770
|
)
|
|
|
(1,922
|
)
|
Federal benefit of state tax deferred tax assets
|
|
|
(2,813
|
)
|
|
|
(1,308
|
)
|
Deferred tax liabilities
|
|
|
(11,309
|
)
|
|
|
(3,694
|
)
|
Net deferred tax assets
|
|
$
|
48,782
|
|
|
$
|
57,224
|
|
We have NOL carry-forwards of approximately $15.7 million for federal income tax purposes at December 31, 2016 which can be carried forward to offset future taxable income. We do not have any material state NOL tax carryforwards. We have available tax credit carry-forwards of approximately $11.4 million and $4.7 million, net of unrecognized tax benefit for federal and state income tax purposes, respectively at December 31, 2016, which can be carried forward to offset future taxable liabilities. Our federal NOLs will begin to expire in 2020. The federal tax credits begin to expire in 2019. Under California law, California tax credits do not have an expiration date.
STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
We recognize excess tax benefits associated with the exercise of stock options directly to stockholders’ equity only when realized. We have made an accounting policy election to exclude from the measurement of the excess tax deduction any indirect effects of the tax deduction. Accordingly, deferred tax assets are not recognized for NOL carry-forwards resulting from excess tax benefits. As of December 31, 2016, deferred tax assets do not include approximately $6 million of these excess tax benefits from employee stock option exercises that are a component of our NOL carry-forwards. Accordingly, additional paid-in capital will increase up to an additional $6 million if and when such excess tax benefits are realized.
Based on our election under ASC 718 to use the “with-and-without” approach when utilizing net operating losses consisting of other operating losses and excess tax benefits, the excess tax benefit will be deemed to be the last benefit utilized, and in accordance with ASC 718, benefits for share based payments are not recorded to APIC until such payments result in a reduction to income taxes payable. Our 2016 income tax provision utilized federal and state APIC tainted net operating loss in the current year resulting in a reduction to income taxes payable and a benefit to APIC in the amount of $26.8 million.
The Federal Tax Reform Act of 1986 and similar state tax laws contain provisions that may limit the NOL carryforwards to be used in any given year upon the occurrence of certain events, including a significant change in ownership interests. Under IRC Section 382 rules, a change in ownership can occur whenever there is a shift in ownership by more than 50 percentage points by one or more “5% shareholders” within a three-year period. When a change of ownership is triggered, the NOLs may be impaired. In July 2016, we acquired ShippingEasy Group, Inc. (ShippingEasy) which had a federal tax attribute carryforward of approximately $12 million. As a consequence of the ownership change, our federal tax attribute carryforward was subject to limitation under IRC Section 382. We conducted an analysis to compute the limitations and utilization of ShippingEasy’s NOLs as allowed under Section 382 and expect to utilize all carryforwards before their expiration.
The income tax expense (benefit) consists of (in thousands):
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Current:
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
2,400
|
|
|
$
|
806
|
|
|
$
|
730
|
|
State
|
|
|
5,722
|
|
|
|
611
|
|
|
|
127
|
|
|
|
|
8,122
|
|
|
|
1,417
|
|
|
|
857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
11,023
|
|
|
|
(596
|
)
|
|
|
(14,286
|
)
|
State
|
|
|
(3,403
|
)
|
|
|
(1,341
|
)
|
|
|
652
|
|
Adjustment for change in tax rate
|
|
|
(781
|
)
|
|
|
(1,471
|
)
|
|
|
80
|
|
APIC charge on excess tax benefits
|
|
|
26,784
|
|
|
|
618
|
|
|
|
—
|
|
|
|
|
33,623
|
|
|
|
(2,790
|
)
|
|
|
(13,554
|
)
|
Income tax expense (benefit)
|
|
$
|
41,745
|
|
|
$
|
(1,373
|
)
|
|
$
|
(12,697
|
)
|
STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Differences between the benefit for income taxes and income taxes at the statutory federal income tax rate are as follows (in thousands):
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Income tax at statutory federal rate
|
|
$
|
40,941
|
|
|
$
|
(1,950
|
)
|
|
$
|
8,223
|
|
State tax – net of federal benefit
|
|
|
4,127
|
|
|
|
(2
|
)
|
|
|
290
|
|
Stock-based compensation
|
|
|
2,757
|
|
|
|
851
|
|
|
|
497
|
|
Nondeductible items
|
|
|
485
|
|
|
|
902
|
|
|
|
15
|
|
Research and development
|
|
|
(1,963
|
)
|
|
|
—
|
|
|
|
—
|
|
Uncertain tax positions
|
|
|
(2,048
|
)
|
|
|
173
|
|
|
|
1,767
|
|
Change in tax rate
|
|
|
(781
|
)
|
|
|
(1,471
|
)
|
|
|
80
|
|
Change in valuation allowance
|
|
|
—
|
|
|
|
—
|
|
|
|
(13,554
|
)
|
Other changes in valuation allowance, net
|
|
|
—
|
|
|
|
—
|
|
|
|
(11,480
|
)
|
Other, net
|
|
|
(1,773
|
)
|
|
|
124
|
|
|
|
1,465
|
|
|
|
$
|
41,745
|
|
|
$
|
(1,373
|
)
|
|
$
|
(12,697
|
)
|
In 2016, we revised our estimated annual effective tax rate to reflect a change in the state statutory rates as well as additional state filings effective January 1, 2016. As a result, we recorded a $0.8 million deferred tax benefit from the application of the change in tax rate to the net deferred tax assets. The Company completed a study in 2016 regarding the calculation of research and development credit carryforwards. As a result of the analysis, the Company recognized deferred tax assets for federal and state research and development credits of approximately $6 million.
Stock Incentive Plans
Our 1999 Stock Incentive Plan (the “1999 Plan”), which became effective in June 1999, was the successor to the 1998 Stock Plan (the “1998 Plan”). Upon approval of the 1999 Plan, all outstanding options under the 1998 Plan were transferred to the 1999 Plan, and no further option grants were made under the 1998 Plan. All outstanding options under the 1998 Plan continue to be governed by the terms and conditions of the existing option agreements for those grants, unless our compensation committee decides to extend one or more features of the 1999 Plan to those options. In June 2009, our 1999 Plan expired and no further options grants were made under the 1999 Plan. Our 2010 Equity Incentive Plan (the “2010 Plan”) was approved by our stockholders in June 2010. Under the 2010 Plan, we are authorized to issue 3,500,000 shares of common stock and stock units, although “full value” awards (such as restricted stock and restricted stock units) will be counted against the 2010 Plan’s overall limits as two shares (rather than one), while options and stock appreciation rights will be counted as one share.
On September 9, 2014, our Board of Directors approved an amendment (the “2014 Amendment”) to our 2010 Plan, which was approved by our shareholders on June 17, 2015. Pursuant to the 2014 Amendment, the maximum aggregate number of shares of common stock and stock units available for the grant of awards under the 2010 Plan was increased by an additional 2,100,000 shares. On April 28, 2016, our Board of Directors adopted an amendment (the “2016 Amendment”), subject to shareholder approval, to increase the maximum aggregate number of shares of common stock and stock units available for grants by an additional 1,200,000 shares. The number of shares of common stock remaining available for future issuance under the equity compensation plans was 1,370,000 excluding the number of shares of common stock to be issued upon exercise of outstanding options, warrants and rights. The 2016 Amendment was approved by our shareholders on June 13, 2016. Except for the 2014 and 2016 Amendments to the Plan to increase the number of shares issuable, the Plan otherwise remains unchanged.
On April 9, 2015, pursuant to the 2014 Amendment, our compensation committee approved additional performance-based stock option grants for certain of our employees. These additional option awards granted under the 2014 Amendment vest monthly in equal parts over a 36-month period that commenced on the closing of our acquisition of Endicia. The number of options issued was approximately 175,000. For these awards subject to performance conditions, the fair value per award was fixed at the grant date on June 17, 2015, the date the 2014 Amendment was approved by the shareholders.
For the years ended December 31, 2016 and 2015, the total stock-based compensation expense for these performance-based awards was approximately $1.3 million and $646,000, respectively.
STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
A summary of stock option activity is as follows (in thousands, except per share amounts):
|
|
Options
Outstanding
|
|
|
Weighted
Average
Exercise
Price per
Share
|
|
Number of
Options
|
Balance at December 31, 2013
|
|
|
996
|
|
|
$
|
18.12
|
|
Granted
|
|
|
2,251
|
|
|
|
32.55
|
|
Forfeited
|
|
|
(75
|
)
|
|
|
35.96
|
|
Exercised
|
|
|
(203
|
)
|
|
|
16.34
|
|
Balance at December 31, 2014
|
|
|
2,969
|
|
|
$
|
28.91
|
|
Granted
|
|
|
694
|
|
|
|
65.96
|
|
Forfeited
|
|
|
(98
|
)
|
|
|
37.43
|
|
Exercised
|
|
|
(459
|
)
|
|
|
23.73
|
|
Balance at December 31, 2015
|
|
|
3,106
|
|
|
$
|
37.75
|
|
Granted
|
|
|
816
|
|
|
|
91.36
|
|
Forfeited
|
|
|
(198
|
)
|
|
|
72.72
|
|
Exercised
|
|
|
(432
|
)
|
|
|
30.04
|
|
Balance at December 31, 2016
|
|
|
3,292
|
|
|
$
|
49.95
|
|
The weighted-average fair value of stock options granted for 2016, 2015 and 2014 using the Black-Scholes valuation method are as follows:
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Weighted-average fair value of stock options with an exercise price equal to the market price on the grant date
|
|
$
|
32.27
|
|
|
$
|
23.19
|
|
|
$
|
11.87
|
|
Weighted-average fair value of stock options with an exercise price greater than the market price on the grant date
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
32.27
|
|
|
$
|
23.19
|
|
|
$
|
11.87
|
|
Weighted average exercise prices for stock options exercised in 2016 are as follows:
|
|
2016
|
|
Weighted-average exercise price of stock options with an exercise price equal to the market price on the grant date
|
|
$
|
30.04
|
|
Weighted-average exercise price of stock options with an exercise price greater than the market price on the grant date
|
|
|
—
|
|
Total weighted-average exercise price
|
|
$
|
30.04
|
|
STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The following tables summarize information concerning outstanding and exercisable options at December 31, 2016 (in thousands, except numbers of years and per share amounts):
|
|
|
Options Outstanding
|
|
|
Options Exercisable
|
|
Range of Exercise Prices
|
|
|
Number
Outstanding
|
|
|
Weighted
Average
Remaining
Contractual
Life (in Years)
|
|
|
Weighted
Average
Exercise
Price per
Share
|
|
|
Number
Exercisable
|
|
|
Weighted
Average
Exercise
Price per
Share
|
|
$0.00 - $9.99
|
|
|
|
18
|
|
|
|
2.3
|
|
|
$
|
9.12
|
|
|
|
18
|
|
|
$
|
9.12
|
|
$10.00 - $19.99
|
|
|
|
197
|
|
|
|
4.0
|
|
|
|
12.62
|
|
|
|
197
|
|
|
|
12.62
|
|
$20.00 - $29.99
|
|
|
|
89
|
|
|
|
6.0
|
|
|
|
26.17
|
|
|
|
79
|
|
|
|
25.83
|
|
$30.00 - $39.99
|
|
|
|
1,649
|
|
|
|
7.7
|
|
|
|
32.57
|
|
|
|
1,132
|
|
|
|
32.59
|
|
$40.00 - $49.99
|
|
|
|
72
|
|
|
|
7.6
|
|
|
|
45.23
|
|
|
|
43
|
|
|
|
45.06
|
|
$50.00 - $59.99
|
|
|
|
122
|
|
|
|
8.2
|
|
|
|
58.25
|
|
|
|
68
|
|
|
|
58.25
|
|
$60.00 - $69.99
|
|
|
|
216
|
|
|
|
8.3
|
|
|
|
66.00
|
|
|
|
77
|
|
|
|
66.12
|
|
$70.00 - $79.99
|
|
|
|
256
|
|
|
|
8.8
|
|
|
|
73.73
|
|
|
|
72
|
|
|
|
72.25
|
|
$80.00 - $89.99
|
|
|
|
266
|
|
|
|
9.2
|
|
|
|
87.24
|
|
|
|
—
|
|
|
|
—
|
|
$90.00 - $99.99
|
|
|
|
361
|
|
|
|
9.4
|
|
|
|
94.51
|
|
|
|
22
|
|
|
|
91.86
|
|
$100.00 - $109.99
|
|
|
|
42
|
|
|
|
9.6
|
|
|
|
104.11
|
|
|
|
3
|
|
|
|
101.32
|
|
$120.00 - $129.99
|
|
|
|
5
|
|
|
|
9.2
|
|
|
|
122.25
|
|
|
|
—
|
|
|
|
—
|
|
$0.00 - $129.99
|
|
|
|
3,293
|
|
|
|
7.9
|
|
|
$
|
49.95
|
|
|
|
1,711
|
|
|
$
|
35.14
|
|
The following table summarizes stock option activity for 2016:
|
|
Number of
Stock Options
(in thousands)
|
|
|
Weighted
Average
Exercise Price
|
|
|
Weighted
Average
Remaining
Contractual
Life
(in years)
|
|
|
Aggregate
Intrinsic
Value
(in thousands)
|
|
Outstanding at December 31, 2015
|
|
|
3,106
|
|
|
$
|
37.75
|
|
|
|
|
|
|
|
Granted
|
|
|
816
|
|
|
|
91.36
|
|
|
|
|
|
|
|
Exercised
|
|
|
(432
|
)
|
|
|
30.04
|
|
|
|
|
|
|
|
Forfeited or expired
|
|
|
(198
|
)
|
|
|
72.72
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
|
|
3,292
|
|
|
$
|
49.95
|
|
|
|
7.9
|
|
|
$
|
213,066
|
|
Exercisable at December 31, 2016
|
|
|
1,711
|
|
|
$
|
35.14
|
|
|
|
7.2
|
|
|
$
|
136,056
|
|
The aggregate intrinsic value in the table above represents the total pretax intrinsic value, based on our closing stock price of $114.65 at December 30, 2016, the last trading day of 2016, which would have been received by award holders had all award holders exercised their awards that were in-the-money as of that date.
The weighted average grant date fair value of options granted during 2016, 2015 and 2014 was $32.27, $23.19 and $11.87, respectively. The weighted average grant date fair value of options vested during 2016, 2015 and 2014 was $30.68, $12.46 and $8.44, respectively. The total intrinsic value of options exercised during 2016, 2015 and 2014 was approximately $36.5 million, $39.4 million and $6.4 million, respectively.
STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The following table summarizes the status of our non-vested stock options as of December 31, 2016:
|
|
Non-vested
Number of
Stock
Options (in
thousands)
|
|
|
Weighted
Average
Grant Date
Fair Value
per Option
|
|
Non-vested at December 31, 2015
|
|
|
1,900
|
|
|
$
|
29.62
|
|
Granted
|
|
|
816
|
|
|
|
32.37
|
|
Vested
|
|
|
(1,092
|
)
|
|
|
30.68
|
|
Forfeited / Cancelled
|
|
|
(42
|
)
|
|
|
21.65
|
|
Non-vested at December 31, 2016
|
|
|
1,582
|
|
|
$
|
30.35
|
|
As of December 31, 2016, there was $44.5 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements, which is expected to be recognized over a weighted-average period of approximately 2 years.
Equity Inducement Plans
In connection with the ShippingEasy acquisition, we issued performance based inducement equity awards to two executives of ShippingEasy covering an aggregate of up to approximately 87,000 shares of common stock if earnings targets for ShippingEasy are achieved over a two and one-half year period beginning July 1, 2016. The awards are subject to proration if at least 75% of the applicable target is achieved and are subject to forfeiture or acceleration based on changes in employment circumstances over the performance period.
In addition, in connection with the ShippingEasy acquisition we made inducement stock option grants for an aggregate of 62,000 shares of Stamps.com common stock to 48 employees. Each option vests 25% on the one year anniversary of the grant date and the remaining 75% vesting in approximately equal monthly increments over the succeeding thirty-six months provided that the option holder is still employed by the Company on the vesting dates. The stock options have a ten year term and an exercise price equal to the closing price of Stamps.com common stock on the grant date of July 1, 2016.
The two inducement plans were exempt from stockholder approval requirements as an employment inducement grant plan under applicable Nasdaq Listing Rule 5635(c)(4) as inducements material to the new employees entering into employment with Stamps.com.
Employee Stock Purchase Plan
In June 1999, our Board of Directors adopted an Employee Stock Purchase Plan (ESPP), which allows our eligible employees to purchase shares of common stock, at semi-annual intervals, with their accumulated payroll deductions.
Eligible participants may contribute up to 15% of cash earnings through payroll deductions, and the accumulated deductions will be applied to the purchase of shares on each semi-annual purchase date. The purchase price per share is equal to 85% of the fair market value per share on the participant’s entry date into the offering period or, if lower, 85% of the fair market value per share on the semi-annual purchase date.
Upon adoption of the ESPP, 150,000 shares of common stock were reserved for issuance. This reserve automatically increases on the first trading day in January each year, by an amount equal to 1% of the total number of outstanding shares of our common stock on the last trading day in December in the prior year. In no event will any annual increase exceed 260,786 shares.
STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In July 2009, our Board of Directors amended our ESPP to extend it for a period of ten years beyond its original expiration date of July 31, 2009. Under this amendment, the total shares available for issuance may not increase. As of December 31, 2016 and 2015, we had approximately 1.6 million shares available for issuance under our ESPP. Total shares of common stock issued pursuant to the ESPP during 2016, 2015 and 2014 were approximately 35,000, 49,000, and 42,000, respectively.
Savings Plan
We have a savings plan for all eligible employees which qualifies under Section 401(k) of the Internal Revenue Code. Participating employees may contribute any percentage of their pretax salary, but not more than statutory dollar limits. We match participant contributions up to certain limitations. We expensed approximately $1.1 million, $650,000 and $402,000 in 2016, 2015 and 2014, respectively, related to this plan.
12.
|
Commitments and Contingencies
|
Legal Proceedings
We are subject to various routine legal proceedings and claims incidental to our business, and we do not believe that these proceedings and claims would reasonably be expected to have a material adverse effect on our financial position, results of operations or cash flows.
Although management at present believes that the ultimate outcome of the various routine proceedings, individually and in the aggregate, will not materially harm our financial position, results of operations, cash flows, or overall trends, legal proceedings are subject to inherent uncertainties, and unfavorable rulings or other events could occur. An unfavorable outcome for an amount in excess of management’s present expectations may result in a material adverse impact on our business, results of operations, financial position, and overall trends.
Commitments
The Company leases facilities pursuant to noncancelable operating lease agreements expiring through 2021. Rent expense is recognized on a straight-line basis over the lease term. Lease incentives are amortized over the lease term on a straight-line basis. Leasehold improvements are capitalized and amortized over the shorter of the useful life of the asset or the remaining term of the lease. Rent expense was approximately $3.0 million, $874,000, and $215,000 for the years ended December 31, 2016, 2015 and 2014, respectively.
The following table is a schedule of our significant contractual obligations and commercial commitments (other than debt commitments, which are summarized in
Note 7- “Debt”
), which consist of future minimum lease payment under operating leases as of December 31, 2016 (in thousands):
Twelve Month Period Ending December 31,
|
|
Operating
Lease Obligations
|
|
2017
|
|
$
|
4,048
|
|
2018
|
|
|
3,563
|
|
2019
|
|
|
1,369
|
|
2020
|
|
|
1,396
|
|
2021
|
|
|
1,052
|
|
Thereafter
|
|
|
—
|
|
Total
|
|
$
|
11,428
|
|
STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
We are not aware of any material subsequent events or transactions that have occurred that would require recognition in the financial statements or disclosure in the notes to the financial statements.
14.
|
Quarterly Information (Unaudited)
|
|
|
Quarter Ended
|
|
|
|
March
|
|
|
June
|
|
|
September
(3)
|
|
|
December
(2)
|
|
|
|
(in thousands except per share data)
|
|
Fiscal Year 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
81,837
|
|
|
$
|
84,013
|
|
|
$
|
92,559
|
|
|
$
|
105,896
|
|
Gross profit
|
|
|
67,215
|
|
|
|
70,293
|
|
|
|
75,832
|
|
|
|
87,993
|
|
Income from operations
|
|
|
22,219
|
|
|
|
24,967
|
|
|
|
31,591
|
|
|
|
41,443
|
|
Net income
|
|
|
13,238
|
|
|
|
14,291
|
|
|
|
18,672
|
|
|
|
29,028
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.76
|
|
|
$
|
0.82
|
|
|
$
|
1.08
|
|
|
$
|
1.71
|
|
Diluted
|
|
$
|
0.71
|
|
|
$
|
0.79
|
|
|
$
|
1.03
|
|
|
$
|
1.61
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
17,357
|
|
|
|
17,384
|
|
|
|
17,218
|
|
|
|
17,018
|
|
Diluted
|
|
|
18,664
|
|
|
|
18,192
|
|
|
|
18,120
|
|
|
|
18,026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
44,052
|
|
|
$
|
48,360
|
|
|
$
|
51,669
|
|
|
$
|
69,876
|
|
Gross profit
|
|
|
34,427
|
|
|
|
38,422
|
|
|
|
40,480
|
|
|
|
56,693
|
|
Income (loss) from operations
|
|
|
(2,159
|
)
|
|
|
(15,152
|
)
|
|
|
12,991
|
|
|
|
(1,000
|
)
|
Net (loss) income
|
|
|
(970
|
)
|
|
|
(10,431
|
)
|
|
|
7,274
|
|
|
|
(71
|
)
|
Net (loss) income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.06
|
)
|
|
$
|
(0.64
|
)
|
|
$
|
0.44
|
|
|
$
|
(0.00
|
)
|
Diluted
|
|
$
|
(0.06
|
)
|
|
$
|
(0.64
|
)
|
|
$
|
0.42
|
|
|
$
|
(0.00
|
)
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
16,156
|
|
|
|
16,402
|
|
|
|
16,538
|
|
|
|
16,642
|
|
Diluted
|
|
|
16,156
|
(1)
|
|
|
16,402
|
(1)
|
|
|
17,517
|
|
|
|
16,642
|
(1)
|
Quarterly and year-to-date computations of per share amounts are made independently. Therefore, the sum of per share amounts for the quarters may not agree with per share amounts for the year shown elsewhere in our Annual Report on Form 10-K.
(1)
|
Common stock equivalents are excluded from the diluted earnings per share calculation as their effect is anti-dilutive.
|
(2)
|
The fourth quarter results of 2015 include the impact of the Company’s acquisition of Endicia.
|
(3)
|
The third and fourth quarter results of 2016 include the impact of the Company’s acquisition of ShippingEasy.
|
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Los Angeles, State of California, on the 1
st
day of March 2017.
|
STAMPS.COM INC.
|
|
|
|
|
|
By:
|
/s/ KENNETH MCBRIDE
|
|
|
|
Kenneth McBride
|
|
|
|
Chief Executive Officer and Chairman of the Board of Directors
|
|
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ KENNETH MCBRIDE
|
|
Chairman and Chief Executive Officer
|
|
March 1, 2017
|
Kenneth McBride
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
/s/ KYLE HUEBNER
|
|
Co-President and Chief Financial Officer
|
|
March 1, 2017
|
Kyle Huebner
|
|
(Principal Financial and Accounting Officer)
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
March 1, 2017
|
Mohan P. Ananda
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
March 1, 2017
|
David Habiger
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
March 1, 2017
|
G. Bradford Jones
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
March 1, 2017
|
Lloyd I. Miller
|
|
|
|
|
|
|
|
|
|
*
|
|
Director
|
|
March 1, 2017
|
Theodore R. Samuels
|
|
|
|
|
*By Kenneth McBride as Attorney-in-fact.