Stamps.com 2005 Annual Report Download - page 32

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software. Research and development expense increased from $4.8 million in fiscal 2003 to $6.2 million in fiscal 2004, an increase of 29%. As a
percentage of total revenue, research and development expense decreased seven percentage points from 23% in fiscal 2003 to 16% in fiscal
2004 due to the growth in revenues. The increase in research and development expense is primarily due to the increase in our headcount as we
focused on new products and the improvement of existing products. In addition, during the first quarter of fiscal 2004, we incurred a charge of
approximately $900,000 relating to cash and stock distributed to employees to compensate them for the loss in value of employee stock options
held by research and development personnel as a result of our return of capital cash dividend of $1.75 per share in February 2004. We did not
incur a similar charge in the fiscal year 2003.
General and Administrative.
General and administrative expense principally consisted 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 intangible assets and deferred compensation. General and administrative expense decreased from $14.5 million in
fiscal 2003 to $13.0 million in fiscal 2004, a decrease of ten percent. As a percentage of total revenue, general and administrative expenses
decreased 34 percentage points from 68% in fiscal 2003 to 34% in fiscal 2004. During the first quarter of fiscal 2004, we incurred a charge of
approximately $1.6 million relating to cash and stock distributed to employees to compensate them for the loss in value of employee stock
options held by general and administrative personnel as a result of our return of capital cash dividend of $1.75 per share in February 2004.
Without the charge, general and administrative expenses would have decreased from $14.5 million in fiscal 2003 to $11.4 million in fiscal
2004, a decrease of 21%. This decrease is primarily due to a reduction in legal fees expense. The decrease in general and administrative
expense as a percentage of total revenue is primarily due to a reduction in legal fee expense and growth in revenues.
Other Income, Net. Other income, net consists of interest income from cash equivalents and short-term and long-term investments, other
loss from the disposal of capitalized assets that are no longer in use, and income relating to a legal settlement in the amount of $1.4 million.
Other income, net decreased from $3.3 million in fiscal 2003 to $2.3 million in fiscal 2004, a decrease of 32%. As a percentage of total
revenue, other income, net decreased ten percentage points from 16% in fiscal 2003 to six percent in fiscal 2004. The decrease is mainly
attributable to lower interest income of $1.9 million in 2004 as compared to $3.3 million in 2003 due to lower invested balances in cash and
equivalents and short-term and long-term investments as a result of our return of capital cash dividend of approximately $78 million in
February 2004. In addition, we recognized expenses of approximately $987,000 related to the write-off of certain capitalized assets that were
no longer in use and recognized income relating to a legal settlement in the amount of $1.4 million.
Liquidity and Capital Resources
As of December 31, 2005 and 2004, we had approximately $104.0 million and $87.2 million in cash, restricted cash and short-term and
long-term investments, respectively. We invest available funds in short and long term money market funds, commercial paper, corporate notes
and municipal securities and do not engage in hedging or speculative activities.
In November 2003, we entered into a facility lease agreement commencing in March 2004 for our new corporate headquarters with
aggregate lease payments of approximately $4.0 million through February 2010.
The following table is a schedule of our contractual obligations and commercial commitments which is comprised of the future minimum
lease payments under operating leases at December 31, 2005 (in thousands):
29
Years Ended
Operating
2006
632
2007
694
2008
751
2009
794
2010
134
Thereafter —
$
3,005