Stamps.com 2013 Annual Report Download - page 69

STAMPS.COM INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
8.
Property and Equipment
Property and equipment is summarized as follows (in thousands):
During 2013, 2012 and 2011, depreciation expense was approximately $2.4 million, $1.4 million and $838,000, respectively.
9. Income Taxes
During 2013, our net income tax benefit consisted of federal and state alternative minimum taxes and a reduction of a portion of our valuation
allowance on our deferred tax asset (as described below). Our effective income tax rate differs from the statutory income tax rate primarily as a
result of the reduction of a portion of our valuation allowance. We evaluated the appropriateness of our deferred tax assets and related valuation
allowance in accordance with ASC 740 based on all available positive and negative evidence. A valuation allowance is recorded against a
portion of our gross deferred tax assets as we have determined the realization of these assets does not meet the more likely than not criteria.
On March 6, 2012, we entered into a binding agreement with PSI Systems, Inc. (PSI) to resolve all outstanding patent litigation among the
parties. Because the PSI litigation settlement occurred during the first quarter of 2012, we eliminated what had previously been negative
evidence at that time. The litigation settlement then became positive evidence because (1) it eliminated the hard-to-predict fluctuations in
litigation expenditures, which we expected to be material in future forecasts, (2) it eliminated the potential for a material negative financial
judgment against us and (3) it eliminated the possibility of an injunction against us. We believe the other positive and negative evidence we
evaluated is consistent (e.g., no material change has occurred) relative to our evaluation of this evidence in prior periods. Based on this discrete
event, we extended our forecast of projected taxable income from two years to three years for the portion of our deferred tax asset for which it
was more likely than not that a tax benefit would be realized under ASC 740 as of March 31, 2012. As a result, we released a portion of our
valuation allowance totaling $11.9 million during the first quarter of 2012.
During the fourth quarter of 2012, we re-evaluated positive and negative evidence relating to our gross deferred tax assets and valuation
allowance noting that there was no additional discrete event subsequent to the first quarter of 2012. During the fourth quarter of 2012, we
updated our three year forecast of projected taxable income. Based on the updated forecast and a change in the California state tax laws, we
recorded another release of a portion of our valuation allowance in the fourth quarter of 2012 totaling approximately $2.5 million.
During the fourth quarter of 2013, we re-evaluated positive and negative evidence relating to our gross deferred tax assets and valuation
allowance noting that there was no discrete event. During the fourth quarter of 2012, we updated our three year forecast of projected taxable
income. Based on the updated forecast, we recorded another release of a portion of our valuation allowance in the fourth quarter of 2013 totaling
approximately $9.7 million.
F-19
Table of Contents
2013
2012
Land
$
7,156
$
7,156
Building
4,886
4,886
Building improvements
13,483
13,569
Furniture and equipment
987
1,362
Computers and software
12,228
8,311
38,740
35,284
Less accumulated depreciation and amortization
(8,977
)
(6,653
)
Property and equipment, net
$
29,763
$
28,631