Stamps.com 2007 Annual Report Download - page 45

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registration process, completes the first purchase or in some cases, upon the first successful billing of a customer. We record
these expenses on a monthly basis as prospects are successfully converted to customers.
General and Administrative
General and administrative expense principally consists 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.
F-43
TABLE OF CONTENTS
STAMPS.COM INC.
NOTES TO FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies – (continued)
Net Income per Share
Net income per share represents net income attributable to common stockholders divided by the weighted average number of
common shares outstanding during a reported period. The diluted net income 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 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 per share for the year
ended December 31, 2005 was calculated based on net income not including stock based compensation expense as required by
Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (SFAS 123R). We adopted SFAS
123R on January 1, 2006 using the modified prospective transition method which does not require our prior period financial
statements to be restated. Therefore, earnings per share for the year ended December 31, 2005 have not been restated as allowed
by SFAS 123R. The following table reconciles share amounts utilized to calculate basic and diluted net income 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):
Year Ended December 31,
2007
2006
2005
Net income
$
10,666
$
16,462
$
10,429
Basic – weighted average common shares
20,815
23,233
22,738
Diluted effect of common stock equivalents
379
799
1,006
Diluted – weighted average common shares
21,194
24,032
23,744
Net income per share:
Basic
$
0.51
$
0.71
$
0.46
Diluted
$
0.50
$
0.69
$
0.44
Income Taxes
We adopted the provisions of Financial Accounting Standards Board (FASB) Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (FIN 48) on January 1, 2007. Under FIN 48, we are
required to determine whether it is more likely than not that a tax position will be sustained upon examination based on the
technical merits of the position. A tax position that meets the more likely than not recognition threshold is measured to determine
Year Ended December 31,
2007
2006
2005
Anti-dilutive stock options shares
2,230
557
526