Stamps.com 2013 Annual Report Download - page 39

We evaluated the appropriateness of our deferred tax assets and related valuation allowance in accordance with Accounting Standards
Codification (“ASC”) 740 based on all available positive and negative evidence. On March 6, 2012, we entered into a binding agreement with
PSI Systems, Inc. (“PSI”)
to resolve all outstanding patent litigation among the parties. Because the PSI litigation settlement occurred during the
first quarter of 2012, we eliminated what had previously been negative evidence at that time. The litigation settlement then became positive
evidence because (1) it eliminated the hard-to-predict fluctuations in litigation expenditures, which we expected to be material in future
forecasts, (2) it eliminated the potential for a material negative financial judgment against us and (3) it eliminated the possibility of an injunction
against us. We believed the other positive and negative evidence we evaluated was consistent (e.g., no material change had occurred) relative to
our evaluation of this evidence in prior periods. Based on this discrete event, we extended our forecast of projected taxable income from two
years to three years for the portion of our deferred tax asset for which it was more likely than not that a tax benefit would be realized under ASC
740 as of March 31, 2012. As a result, we released a portion of our valuation allowance totaling $11.9 million during the first quarter of 2012.
During the fourth quarter of 2012, we re-evaluated positive and negative evidence relating to our gross deferred tax assets and valuation
allowance noting that there was no additional discrete event subsequent to the first quarter of 2012. During the fourth quarter of 2012, we
updated our three year forecast of projected taxable income. Based on the updated forecast and a change in the California state tax laws, we
recorded another release of a portion of our valuation allowance in the fourth quarter of 2012 totaling approximately $2.5 million. As of
December 31, 2012, we recorded approximately $31 million of net deferred tax assets, and we continued to maintain a valuation allowance for
the remainder of our gross deferred tax assets.
During 2012, we recorded current tax provision for corporate alternative minimum federal and state taxes of approximately $565,000. During
2011, we were in a taxable loss position for tax reporting purposes and as a result we did not incur any current tax provision.
Liquidity and Capital Resources
As of December 31, 2013 and 2012, we had $87 million and $47 million in cash, short-term and long-term investments, respectively. We invest
available funds in short-term and long-term money market funds, commercial paper, asset-backed securities, corporate notes and bonds and
municipal securities and do not engage in hedging or speculative activities.
On January 23, 2012, we completed the purchase of two adjacent buildings in El Segundo, California that now serve as our corporate
headquarters for an aggregate purchase price of $13.4 million. We substantially completed the renovation and construction project on the
property in 2012. We moved into our new corporate headquarters during the third quarter of 2012. We occupy a portion of the 99,600 square
foot space, with the remaining portion of the space continuing to be leased to the existing tenants. The purchase of the property and renovations
were funded out of our cash flow from operations and existing cash and investments.
Net cash provided by operating activities was approximately $36 million and $27 million in 2013 and 2012, respectively. The increase in net
cash provided by operating activities was primarily attributable to the growth in our revenue and net income and the resulting changes in our
operating assets and liabilities.
Net cash used in investing activities was approximately $9 million and $28 million in 2013 and 2012, respectively. The decrease in net cash
used in investing activities was primarily due to the purchase and renovation of our new corporate headquarters in 2012, which we did not incur
in 2013.
Net cash provided by financing activities was approximately $10 million in 2013. Net cash used in financing activities was approximately $24
million in 2012. The decrease in net cash used in financing activities is primarily due to the decrease of stock purchased through our stock
repurchase program, partially offset by proceeds from employee stock options exercises.
As of December 31, 2013, we do not have any significant contractual obligations or commercial commitments.
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