Stamps.com 2012 Annual Report Download - page 38

Provision (Benefit) for Income Taxes
In 2011 we had an income tax benefit of $8.5 million compared to an income tax benefit of approximately $3.9 million in 2010. The income tax
benefit we realized in 2011 and 2010 was due to the release of a portion of our valuation allowance, which is recorded against our gross deferred
tax asset. During the fourth quarter of 2011 we released a portion of our valuation allowance totaling approximately $8.5 million as a result of
an increase in our projected taxable income. During the second quarter of 2010, we recorded an income tax benefit of approximately $4.0 million
when we determined that a release of a portion of our valuation allowance was appropriate as a result of the following discrete events: (1) our
attainment of over five consecutive years of taxable income, (2) the material decline of our Section 382 ownership under the Internal Revenue
Code from approximately 34% as of March 31, 2010 to approximately 24% as of June 30, 2010 and (3) the settlement of our outstanding patent
infringement litigation with Kara Technology, which improved our confidence in our short-
term taxable income projection by eliminating the
uncertainty of a potential large negative judgment against us and eliminating the related on-
going third party litigation expenses. In making the
determination to release a portion of our valuation allowance, we considered all available positive and negative evidence, including our recent
earnings trend and expected continued future taxable income. As of December 31, 2011, the net deferred tax asset on the balance sheet
represented the projected tax benefit we expect to realize over the future two fiscal years, and we continued to maintain a valuation allowance
against the remainder of our gross deferred tax asset.
During 2010, the State of California passed legislation that extended the suspension of the use of NOLs to offset current state income tax
expense to the years 2010 and 2011. The legislation also raised the limit on the use of tax credits to offset state income tax expense from 50% in
2009 to 100% for 2010 and 2011. As a result, we were able to utilize our tax credits to offset 100% of our state income tax expense in 2010.
Since we were in a taxable loss position in 2011, we did not incur any state income tax expense and thus did not have to utilize any tax credits in
2011
Liquidity and Capital Resources
As of December 31, 2012 and 2011, we had $47 million and $69 million in cash, restricted cash and short-term and long-
term investments,
respectively. We invest available funds in short-term and long-term money market funds, commercial paper, asset-
backed securities, corporate
notes and bonds and municipal securities and do not engage in hedging or speculative activities.
On January 23, 2012, we completed the purchase of two adjacent buildings in El Segundo, California that now serves as our corporate
headquarters for an aggregate purchase price of $13.4 million. We substantially completed the renovation and construction project on the
property in 2012. We moved into our new corporate headquarters during the third quarter of 2012. We occupy a portion of the 99,600 square
foot space, with the remaining portion of the space continuing to be leased to the existing tenants. The purchase of the property and renovations
were funded out of our cash flow from operations and existing cash and investments.
During 2012, we repurchased 1.5 million shares of our common stock for $31.8 million. During 2013, subject to limitations that may be imposed
by applicable securities laws and regulations and the rules of The NASDAQ Stock Market, we may consider repurchasing stock by evaluating
such factors as the price of the stock, the daily trading volume and the availability of large blocks of stock and any additional constraints related
to material inside information we may possess. We have no commitments to make any such purchases.
Net cash provided by operating activities was $27.3 million and $15.3 million for 2012 and 2011, respectively. The increase in net cash provided
by operating activities was primarily attributable to the growth in our revenue and net income and the resulting changes in our operating assets
and liabilities.
Net cash used in investing activities was $28.3 million in 2012. Net cash provided by investing activities was $10.5 million in 2011. The
increase in net cash used in investing activities was primarily due to the purchase and renovation of our new corporate headquarters and purchase
of investments.
Net cash used in financing activities was $23.5 million in 2012. Net cash provided by financing activities was $20.2 million in 2011. The
increase in net cash used in financing activities is primarily due to the increase of stock purchased through our stock repurchase program,
partially offset by proceeds from employee stock options exercises.
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