Stamps.com 2015 Annual Report Download - page 40

TABLE OF CONTENTS
to$46.1millionin2015from$8.4millionin2014.Theincreasewasprimarilyduetotheadjustmentofthecontingentconsideration
liabilityasaresultoftheformerShipStationownersfullyachievingalloftheirfinancialmeasuresinaccordancewiththepurchase
agreementandanincreaseinourstockprice.SeeNote 3 – “Acquisition” inourNotestoConsolidatedFinancialStatementsforfurther
descriptionofourcontingentconsiderationliabilityrelatedtotheacquisitionofShipStation.
Litigation Settlement
OnAugust14,2014,RapidEnterprises,LLC,D/B/AExpressOne,filedsuitagainstShipStationandsomeofitsexecutivesinthe
ThirdJudicialDistrictCourtforSaltLakeCounty,Utah,alleging,amongotherclaims,thatShipStationbreacheditscontractwith
ExpressOnebyviolatinganexclusivityprovision.ExpressOnesoughtaninjunction,damages,attorneys’feesandcourtcosts.
OnAugust6,2015,Stamps.comandExpressOneenteredintoasettlementagreementthatresolvedalldisputesbetweenthe
parties.Stamps.comagreedtopayExpressOne$10.0millioninexchangeforExpressOne’sdismissalandpermanentwithdrawalof
ExpressOne’stortclaims.Inaddition,thepartiesagreedtocontinueandexpandtheirbusinessrelationshipgoingforward.Theamount
wasexpensedandpaidin2015.
Interest and Other Income, Net
Interestandotherincome,netprimarilyconsistsofinterestincomefromcashequivalents,short-termandlong-terminvestments
andrentalincomefromourcorporateheadquartersinElSegundo,California.Interestandotherincome,netdecreasedto$146,000in
2015from$375,000in2014.Thedecreasewasprimarilyattributableto(1)loweryieldsonourinvestmentbalancesincludingcertain
investmentsinourportfoliothatmaturedandwerereplacedwithloweryieldinvestmentsand(2)lowerrentalincome.
Interest Expense
Interestexpenseconsistsofinterestexpensepaymentsfromthedebtunderourcreditfacilityandtheassociatedaccretionofdebt
issuancecosts.Interestexpensewas$397,000in2015comparedto$0in2014.Theinterestexpenseresultedfromthedebtincurredin
connectionwithacquisitionofEndiciain2015.SeeNote 7 – “Debt” inourNotestoConsolidatedFinancialStatementsforfurther
discussion.
Provision for Income Taxes
In2015,ournetincometaxbenefitof$1.4millionconsistedofcurrentincometaxexpenseconsistingoffederalalternative
minimumtaxandvariousstatetaxesanddeferredincometaxbenefitconsistingofnondeductibletemporarytaxitemsincluding
contingentconsideration,stockcompensationandamortizableintangibles.Inaddition,thedeferredincometaxbenefitconsistedofa
changeinthefederalstatutoryratefrom34%to35%.In2014,ournetincometaxbenefitof$12.7millionconsistedofanincometax
benefitresultingfromthereleaseofourvaluationallowanceoffsetbycurrentincometaxexpenseconsistingoffederalandstate
alternativeminimumtaxes.OnJune10,2014wecompletedouracquisitionofShipStation.OnAugust29,2014wecompletedour
acquisitionofShipWorks.Basedonthesediscreteevents,weanalyzedourdeferredtaxassetsincludingourremainingtaxlosscarry-
forward.Aftercompletingourforecastoffutureincometakingintoconsiderationthepotentialsynergiesofouracquisitions,we
believedwehadmetthemorelikelythannotthresholdthatwewouldbeabletoutilizeourremainingtaxlosscarry-forwardsinthe
foreseeablefuture.Asaresultwereleasedtheremainingvaluationallowanceduringthefourthquarterof2014.During2014we
recordedcurrentincometaxexpenseforalternativeminimumfederalandstatetaxesof$856,000andincometaxbenefitfortherelease
ofourvaluationallowancetotalingapproximately$13.6million,totalingtoanetincometaxbenefitof$12.7million.During2015we
recordedcurrentincometaxexpenseforalternativeminimumfederalandstatetaxesofapproximately$1.4million.Becausewedid
nothaveanyvaluationallowancereleasein2015,ournetincometaxbenefitdecreased89%to$1.4millionin2015from$12.7million
in2014.
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,includingourrecentearningtrendandexpectedfutureincome.AsofDecember31,2015
and2014,wedonothaveanyvaluationallowanceagainstourgrossdeferredtaxassets.
Trend Analysis
WeexpectourMailingandShippingrevenuetoincreasein2016comparedto2015.OurabilitytogrowourMailingandShipping
revenueispartlydependentonourabilitytoincreaseoursalesandmarketingspendto
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