Stamps.com 2003 Annual Report Download - page 28

Table of Contents
decrease in research and development expenses in 2002 is primarily due to increased cost control efforts and the reduction in headcount during
2001.
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 $9.7 million for the year ended December 31, 2001, to $2.5 million for the year ended December 31, 2002, a decrease of
74.2%. The decrease in sales and marketing expenses in 2002 resulted from a reduction in sales and marketing personnel in February and
August of 2001, the termination of fixed-cost marketing deals during 2001, as well as a smaller and 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 December 31,
2002 and 2001 were $15.5 million and $196.7 million, respectively. The decrease in 2002 is due to cost control efforts and the reduction in
headcount during 2001, and to a non-cash charge of $163.6 million in the first quarter of 2001 to reduce goodwill and other intangibles
associated with the purchase of iShip in order 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 85% of the workforce through 3 rounds of layoffs,
terminated our fixed-cost marketing agreements and disposed of excess assets. The resulting restructuring charge for the year ended
December 31, 2001 was $26.0 million. This charge consists 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 December 31, 2002 and 2001 were $4.9 million and
$10.1 million, respectively. This decrease is due to the continued decline of interest rates in 2002 and a reduction of invested capital as a result
of share repurchases during 2002.
Liquidity and Capital Resources
As of December 31, 2003 and 2002, we had approximately $162.8 million and $172.7 million in cash, restricted cash and short-term and
long-
term investments, respectively. We regularly invest available capital in short and long term government and corporate securities as well as
money market funds and commercial paper and do not engage in hedging or speculative activities.
In April 2002, the Board of Directors authorized the repurchase of up to $20.0 million of our common stock over the following six months,
and we repurchased 1.3 million shares of common stock for $5.6 million under that program. In October 2002, the Board authorized a second
stock repurchase program for up to $30 million of our common stock for an additional six month period. Subsequently, during the fourth
quarter of 2002, we repurchased approximately 4.4 million shares for $17.5 million. In April 2003, the Board authorized a third stock
repurchase program for up to $20 million of our common stock for an additional six month period. In October 2003, the Board authorized a
fourth stock repurchase program for up to $20 million of our common stock over the following 12 months. As of December 31, 2003, we had
repurchased approximately 648,000 shares for $2.7 million under our stock repurchase programs during 2003. In total during 2002 and 2003,
we repurchased 6.3 million shares, approximately 12% of our shares outstanding balance on March 31, 2002, before we began the various
repurchase programs.
Net cash used in operating activities was $5.5 million for the year ended December 31, 2003 as compared to net cash provided by operating
activities of $1.4 million for the year ended December 31, 2002. The increase in net cash used in operating activities resulted primarily from
increased expenditures in sales and marketing due to increased customer acquisition.
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