Stamps.com 2011 Annual Report Download - page 28

Download and view the complete annual report

Please find page 28 of the 2011 Stamps.com annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 133

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with Item 6. “
Selected
Financial Data
”
of this Report and our financial statements and the related notes thereto included in this Report. This discussion contains
forward
-
looking statements that involve risks and uncertainties that could cause actual results to differ materially from historical results or
anticipated results including those set forth in Item 1A. “Risk Factors” of this Report. See the discussion of forward-
looking statements on page
1 of Part I of this Report.
Overview
Stamps.com is the leading provider of Internet-
based postage solutions. Our customers use our service to mail and ship a variety of mail
pieces, including postcards, envelopes, flats and packages, using a wide range of United States Postal Service (the “USPS”)
mail classes,
including First Class Mail®, Priority Mail®, Express Mail®, Media Mail®, Parcel Post®,
and others. Our customers include individuals, small
businesses, home offices, medium-
size businesses and large enterprises, and within these segments we target both mailers and shippers. We
were the first ever USPS-licensed vendor to offer PC Postage® in a software-only business model in 1999.
Section 382 Update
We currently have federal and state NOL carry-forwards of approximately $230 million and $125 million, respectively, which when combined
with our other tax credits and tax assets have a potential value of up to $85 million in tax savings. Under Internal Revenue Code Section 382
rules, if a “change of ownership” is triggered, our NOL asset may be impaired. 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. We estimate that as of December
31, 2011 we were at approximately a 15% level compared with the 50% level that would trigger impairment of our NOL asset.
Under our certificate of incorporation, any person or entity, including any company and investment firm, that wishes to become a “
5%
shareholder” (
as defined in our certificate of incorporation) must first obtain a waiver from our board of directors. In addition, any person,
including any company and investment firm, that is already a “5% shareholder”
of ours cannot make any additional purchases of our stock
without a waiver from our board of directors. The NOL Protective Measures contained in our certificate of incorporation are more specifically
described in our Definitive Proxy Statement filed with the SEC on April 2, 2008.
On July 22, 2010, our Board of Directors suspended the NOL Protective Measures by approving a waiver from the NOL Protective Measures to
all persons and entities, including companies and investment firms. As a result, as of the filing date of this Annual Report on Form 10-
K, our
stockholders are now allowed to become “5% shareholders” and existing “5% shareholders”
are allowed to make additional purchases of our
stock each without having to comply with the restrictions contained in the NOL Protective Measures. This waiver may be revoked by our Board
of Directors at any time if the Board deems the revocation necessary to protect against a Section 382 “change of ownership”
that would limit our
ability to utilize future NOLs. For complete details about this waiver from the NOL Protective Measures, please see our Form 8-
K filed on July
28, 2010.
As of February 29, 2012, we had 16,320,263 shares outstanding, and therefore ownership of approximately 815,000 shares or more would
currently constitute a “5% shareholder”.
We strongly urge that any stockholder contemplating becoming a 5% or more shareholder
contact us before doing so.
Results of Operations
Years Ended December 31, 2011 and 2010
Total revenue in 2011 was $101.6 million, an increase of 19% from $85.5 million in 2010. PC Postage revenue, including service revenue,
product revenue and insurance revenue, in 2011 was $93.3 million, an increase of 19% compared to $78.4 million in 2010. PhotoStamps revenue
in 2011 was $8.3 million, an increase of 15% compared to $7.2 million in 2010. Other revenue in 2011 was $6,000, a decrease of 78% compared
to $27,000 in 2010. The following table sets forth the breakdown of revenue for 2011 and 2010 and the resulting percent change (revenue in
$000s):
Table of Contents
24