Stamps.com 2006 Annual Report Download - page 50

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STAMPS.COM INC.
NOTES TO FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies – (continued)
Net Income (Loss) per Share
Net income (loss) per share represents net income (loss) attributable to common stockholders divided by the weighted average number of
common shares outstanding during a reported period. The diluted net income (loss) per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock, including convertible preferred stock and stock options and warrants (commonly and
hereafter referred to as “common stock equivalents”), were exercised or converted into common stock. Diluted net income (loss) per share is
calculated by dividing net income during a reported period by the sum of the weighted average number of common shares outstanding plus
common stock equivalents for the period. Basic and diluted income (loss) per share for the years ended December 31, 2005 and 2004 were
calculated based on net income (loss) not including stock based compensation expense as required by Statement of Financial Accounting
Standards No. 123 (revised 2004), “Share-Based Payment” (SFAS 123R). The Company adopted SFAS 123R on January 1, 2006 using the
modified prospective transition method which does not require the Company’s prior period financial statements to be restated. Therefore, prior
period earnings (loss) per share have not been restated as allowed by SFAS 123R. The following table reconciles share amounts utilized to
calculate basic and diluted net income (loss) per share (in thousands, except per share data):
The calculation of dilutive shares excludes the effect of the following options that are considered anti-dilutive (in thousands):
Income Taxes
The provision for income taxes consists solely of alternative minimum federal and state taxes. The Company’s effective income tax rate
differs from the statutory income tax rate primarily as a result of the establishment of a valuation allowance for the future benefits to be
received from the deferred tax assets including net operating loss carryforwards and research tax credits carryforwards to offset taxable income.
The Company recorded a tax provision subject to the corporate alternative minimum federal and state taxes of approximately $164,000 and
$246,000 for the years ended December 31, 2006 and 2005, respectively. No tax provision was recorded for the year ended December 31, 2004
because the Company had a net loss.
F-10
Year Ended December 31,
2006
2005
2004
Net income (loss)
$
16,462
$
10,429
$
(4,733
)
Basic – weighted average common shares
23,233
22,738
22,361
Diluted effect of common stock equivalents
799
1,006
—
Diluted – weighted average common shares
24,032
23,744
22,361
Net income (loss) per share:
Basic
$
0.71
$
0.46
$
(0.21
)
Diluted
$
0.69
$
0.44
$
(0.21
)
Year Ended December 31,
2006 2005 2004
Anti-dilutive stock options shares
557
526
3,208