Stamps.com 2002 Annual Report Download - page 31

Table of Contents
Cost of Revenues. Cost of revenues principally consists of customer service, promotional expenses, and system operating costs. Cost of
revenues decreased from $23.7million for the year ended December31, 2000, to $8.0million for the year ended December31, 2001. The
decrease is primarily due to automation and reduced labor costs in our customer support operations. We also reduced promotional expenses by
decreasing the amount of free postage given to each customer. In addition, we implemented an expiration feature for free postage so that any
unused portion of a free postage offer expires after the first 30days, resulting in less postage used by each individual customer.
Research and Development. Research and development expenses principally consist of compensation for personnel involved in the
development of the Internet Postage and enterprise shipping service and expenditures for consulting services and third-party software. Research
and development expenses for the year ended December31, 2000 decreased from $33.1million to $12.6million for the year ended December31,
2001. The decrease in research and development expenses is primarily due to increased cost control efforts and the reduction in headcount.
Sales and Marketing. Sales and marketing expenses principally consist of costs associated with strategic relationships, advertising, and
compensation and related expenses for personnel engaged in marketing and business development activities. Sales and marketing expenses
decreased from $73.0million for the year ended December31, 2000, to $9.7million for the year ended December31, 2001. The decrease in sales
and marketing expenses resulted from a reduction in sales and marketing personnel, the termination of fixed-cost marketing deals as well as a
more focused spend of discretionary marketing dollars on programs that provide a higher return on investment.
General and Administrative. General and administrative expenses principally consist 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 goodwill and deferred compensation. General and administrative expenses for the years ended December31, 2001
and 2000 were $196.7million and $105.5million, respectively. The increase is due to a non-cash charge of $163.6million in the first quarter of
2001 to reduce goodwill and other intangibles associated with the purchase of iShip to reflect the present value of future cash flows, net of
estimated transaction costs.
Restructuring Charge . In October 2000, we began our restructuring to more effectively focus on core business opportunities in the postage and
shipping industries. As a part of that restructuring, we eliminated approximately 88% of the workforce through 3rounds of layoffs, terminated
our fixed-cost marketing agreements and disposed of excess assets. The resulting restructuring charge for the years ended December31, 2001
and 2000 were $26.0million and $11.5million respectively. These charges consist primarily of employee severance, reserves established for
exiting contractual arrangements and leases, and property and equipment write-offs.
Interest Income (Expense), Net. Interest income (expense), net consists of income from cash equivalents and investments, net of interest
expense related to financing obligations. Net interest income for the years ended December31, 2001 and 2000 were $10.1million and
$18.4million, respectively. This decrease is due to declining interest rates in 2001 and a reduction in the cash invested.
Liquidity and Capital Resources
As of December 31, 2002 and 2001, we had approximately $172.7million and $192.9million in cash, restricted cash and short-term and
long-term investments, respectively. In June 1999, we completed our initial public offering in which the underwriters sold to the public
5,750,000shares of common stock at $11.00 per share. The net proceeds from the offering were $10.23 per share, or $58.8million in the
aggregate. In December 1999, we completed a follow-on public offering in which the underwriters sold to the public 5,750,000shares of
common stock at $65.00 per share. Our net proceeds from the offering were $61.83 per share, or $355.5million
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2003. EDGAR Online, Inc.