Stamps.com 2015 Annual Report Download - page 66
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STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business
Stamps.comInc.andSubsidiaries(“theCompany”or“we”)aretheleadingproviderofInternet-basedpostagesolutions.Our
customersuseourservicestomailandshipavarietyofmailpieces,includingpostcards,envelopes,flatsandpackages,usingawide
rangeofUnitedStatesPostalService(the“USPS”)mailclasses,includingFirstClassMail®,PriorityMail®,PriorityMailExpress®,
MediaMail®,ParcelSelect®,andothers.CustomersusingourservicereceivediscountedpostageratescomparedtoUSPSretailrates
oncertainmailpiecessuchasFirstClasslettersanddomesticandinternationalPriorityMailandPriorityMailExpresspackages.Our
customersincludeindividuals,smallbusinesses,homeoffices,medium-sizebusinessesandlargeenterprises,andwithinthese
segmentswetargetbothmailersandshippers.WewerethefirsteverUSPS-licensedvendortooffermailingandshippingina
software-onlybusinessmodelin1999.Wealsooffermulti-carriershippingsolutionsunderthebrandnamesShipStation®and
ShipWorks®.
2. Summary of Significant Accounting Policies
Principles of Consolidation
TheconsolidatedfinancialstatementsincludetheaccountsofStamps.comInc.,AuctaneLLC,Interapptive,Inc.,PSISystemsInc.
andPhotoStampsInc.InJune2014,wecompletedouracquisitionof100%oftheoutstandingequityofAuctaneLLC,theTexas
limitedliabilitycompanythatoperatesShipStation(“AuctaneLLC”or“ShipStation”)inacashandcontingentstocktransaction.
ShipStation,basedinAustin,Texas,offersmonthlysubscriptionbasede-commerceshippingsoftwareprimarilyunderthebrands
ShipStationandAuctane.InAugust2014,wecompletedouracquisitionof100%oftheoutstandingequityofInterapptive,Inc.,a
Missouricorporation,thatoperatesShipWorks(“Interapptive,Inc.”or“ShipWorks”)inacashtransaction.ShipWorks,basedinSt.
Louis,Missouri,offersmonthlysubscriptionbasede-commerceshippingsoftware.InNovember2015,weclosedourtransactionto
acquirePSISystems,Inc.(“Endicia”),whichweenteredintoanagreementtopurchasetheminMarch2015.SeeNote 3 –
“Acquisitions” forfurtherdiscussionofouracquisitions.
Because100%ofthevotingcontrolofAuctaneLLC,Interapptive,Inc.andPSISystems,Inc.isheldbyus,wehaveconsolidated
ShipStation,ShipWorksandEndiciafromthedateweobtainedcontrolintheaccompanyingconsolidatedfinancialstatements.
Similarly,duetoour100%control,PhotoStampsInc.isalsoconsolidatedintheaccompanyingconsolidatedfinancialstatementsfrom
thedateofitsinception.Allsignificantintercompanyaccountsandtransactionshavebeeneliminated.
Use of Estimates and Risk Management
ThepreparationoffinancialstatementsinconformitywithU.S.GAAPrequiresustomakeestimatesandassumptionsthataffect
theamountsreportedinthefinancialstatementsandtheaccompanyingnotes.Actualresultscoulddifferfromthoseestimates,andsuch
differencesmaybematerialtothefinancialstatements.Examplesincludeestimatesoflosscontingencies,promotionalcoupon
redemptions,thenumberofPhotoStampsretailboxesthatwillnotberedeemed,realizabilityofdeferredincometaxes,theestimates
andassumptionsusedtocalculatetheallocationofthepurchasepricerelatedtoouracquisitions,includingrelatedcontingent
consideration,andestimatesregardingtheusefullivesofourbuilding,patentsandotheramortizableintangibleassets,andgoodwill.
Contingencies and Litigation
Wearesubjecttovariousroutinelitigationmattersasaclaimantandadefendant.Werecordanyamountsrecoveredinthese
matterswhenreceived.Weestablishlossprovisionsforclaimsagainstuswhenthelossisbothprobableandcanbereasonably
estimated.Ifeitherorbothofthecriteriaarenotmet,weassesswhetherthereisatleastareasonablepossibilitythataloss,or
additionallosses,mayhavebeenincurred.Ifthereisareasonablepossibilitythatalossoradditionallossmayhavebeenincurredfor
suchproceedings,wedisclosetheestimateoftheamountoflossorpossiblerangeofloss,ordisclosethatanestimateoflosscannotbe
made,asapplicable.
Cash Equivalents and Investments
Weconsiderallhighlyliquidinvestmentswithanoriginalorremainingmaturityofthreemonthsorlessatthedateofpurchaseto
becashequivalents.
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