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STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Pro-Forma Financial Information
The pro-forma information presented is for illustrative purposes only and is not necessarily indicative of the results of operations that would
have been realized if the acquisition had been completed on the date indicated, nor is it indicative of future operating results. The pro-forma
financial information does not include any adjustments for operating efficiencies or cost savings.
The following table presents the pro-forma financial information (in thousands, except per share amounts) and assumes the acquisition of
ShipStation and ShipWorks occurred on January 1, 2013. Contingent consideration charge of approximately $8.8 million recognized in 2014 is
excluded from the pro-forma information below:
(1) Pro-forma net income of $56.7 million in 2013 includes valuation allowance releases of $13.6 million and $9.7 million recognized in 2014
and 2013, respectively.
Goodwill represents the excess of the fair value of consideration given over the fair value of the tangible assets, identifiable intangible assets and
liabilities assumed in a business combination.
The following table summarizes goodwill as of December 31, 2014 (in thousands):
Goodwill is reviewed for impairment annually in October utilizing a qualitative assessment or a two-step process. We have an option to make a
qualitative assessment of a reporting unit's goodwill for impairment. If we choose to perform a qualitative assessment and determine the fair
value more likely than not exceeds the carrying value, no further evaluation is necessary. For reporting units where we perform the two-step
process, the first step requires us to compare the fair value of each reporting unit, which we primarily determine using an income approach based
on the present value of discounted cash flows, to the respective carrying value, which includes goodwill. If the fair value of the reporting unit
exceeds its carrying value, the goodwill is not considered impaired. If the carrying value is higher than the fair value, there is an indication that
impairment may exist and the second step is required. In step two, the implied fair value of goodwill is calculated as the excess of the fair value
of a reporting unit over the fair values assigned to its assets and liabilities. If the implied fair value of goodwill is less than the carrying value of
the reporting unit's goodwill, the difference is recognized as an impairment loss.
F-19
Table of Contents
Year Ended December 31,
2014
2013
Revenue
$
154,459
$
137,626
Income from operations
32,873
33,208
Net income
32,342
56,691
(1)
Basic earnings per share
$
2.02
$
3.61
Diluted earnings per share
$
1.97
$
3.48
4.
Goodwill and Intangible Assets
2014
Goodwill balance at December 31, 2013
—
Acquisitions (see Note 3 – “Acquisitions”)
66,893
Goodwill balance at December 31, 2014
66,893