Support.com 2006 Annual Report Download - page 41

Provision for income taxes
($ in thousands)
2006 2005 2004
Income (loss) before income taxes $ (7,748) $ 4,827 $ 10,464
Provision for income taxes (487) (402) (310)
Net Income (loss) $ (8,235) $ 4,425 $ 10,154
Provision for income taxes. In 2006, 2005, and 2004, we recorded income tax provisions of $487,000, $402,000, and $310,000,
respectively. These tax provisions are based on estimates of current taxes due in foreign jurisdictions for income and withholding
taxes. The 2006, 2005 and 2004 tax provisions varied from the expected tax provision at the U.S. federal statutory rate primarily due
to benefits from stock option deductions for which stock−based compensation was not previously benefited and the net reversal of
timing differences, offset by nondeductible expenses.
Liquidity and Capital Resources
Operating Activities
Net cash generated by (used in) operating activities was $(3.0) million in 2006, $(844,000) in 2005, and $14.5 million in 2004.
Amounts included in net income (loss), which do not require the use of cash, primarily include the depreciation of fixed assets,
stock−based compensation expense, amortization of intangible assets, and in−process research and development. The sum of these
items totaled $5.4 million, $2.2 million, and $2.9 million in 2006, 2005 and 2004, respectively. Net cash used in operating activities
during 2006 was the result of the net loss of $(8.2) million, a decrease in deferred revenue of $1.4 million, a decrease in accounts
payable of $700,000, a decrease in accrued compensation of $556,000, and an increase in prepaid expenses and other current assets of
$443,000 partially offset by a decrease in accounts receivable of $2.3 million and an increase in other accrued liabilities of $605,000.
Net cash used in operating activities during 2005 was a result of net income of $4.4 million, an increase in accounts receivable of $7.8
million, an increase of $177,000 in other long−term assets, and a decrease in deferred revenues of $1.6 million offset by a decrease in
prepaid expenses and other current assets of $1.1 million, an increase in accounts payable of $686,000, an increase in other accrued
liabilities and other long−term liabilities of $520,000. Net cash generated by operating activities during 2004 was the result of net
income of $10.2 million, a decrease in accounts receivable of $3.0 million, a decrease in prepaid expenses and other current assets of
$291,000, a decrease in other long−term assets of $195,000, an increase in accrued compensation of $904,000 and an increase in other
accrued liabilities of $726,000, offset by a decrease in deferred revenue of $4.3 million and accounts payable of $83,000.
Our accounts receivable and deferred revenue balances fluctuate from period to period and are primarily dependent on (i) the
timing of the closure of our license agreements, especially larger agreements concluded late in the period, (ii) the related invoicing and
payment provisions under those contracts, (iii) the timing of maintenance renewals and related invoicing, and (iv) collections.
Accounts receivable decreased to $15.1 million at December 31, 2006 from $17.4 million at December 31, 2005. There were two
customers with balances greater than $1.0 million at December 31, 2006. These two customers accounted for approximately $3.6
million in the aggregate, or 24% of net accounts receivable. The balances for these two customers resulted primarily from invoices
raised in December 2006. By comparison, the higher accounts receivable balance at December 31, 2005 was due primarily to several
large license and maintenance renewal invoices raised in December 2005 for six customers. These six customers each had accounts
receivable balances greater than $1.0 million and together accounted for approximately $11.1 million, or 63% of net accounts
receivable at December 31, 2005. As of December 31, 2004, there were only two customers with balances greater than $1.0 million.
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Source: SUPPORTSOFT INC, 10−K, March 16, 2007