Stamps.com 2015 Annual Report Download - page 78

TABLE OF CONTENTS
STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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andthepotentialsynergyofcombiningtheoperationsof
Stamps.comandEndicia.Suchsynergiesincludeestimatedcostreductionsandenhancedsalesandcustomersupportwhichisexpected
todriveincreasedvolume.Weexpecttheentireamountofgoodwillrecordedinthisacquisitionwillbedeductedfortaxpurposes
ratablyovera15yearperiod.Theidentifiedintangibleassetsconsistoftradename,developedtechnologyandcustomerrelationships.
Theestimatedfairvaluesofthetradenameanddevelopedtechnologyweredeterminedusingthe“relieffromroyalty”method.The
estimatedfairvalueofcustomerrelationshipwasdeterminedusingthe“excessearnings”method.Therateutilizedtodiscountnetcash
flowstotheirpresentvalueswasapproximately20%andwasdeterminedafterconsiderationoftheoverallenterpriserateofreturnand
therelativeriskandimportanceoftheassetstothegenerationoffuturecashflows.Developedtechnologyandcustomerrelationship
willbeamortizedonastraight-linebasisovertheirestimatedusefullives.Weexpecttheamortizationofacquiredintangibleswillbe
approximately$2.3millionperquarterfortheremainingestimatedusefullives.
Weincurredapproximately$4.4millionand$1.1millioninacquisitionandintegrationrelatedcorporatedevelopmentexpenses
duringtheyearsendedDecember31,2015and2014,respectively.Thesecostsareincludedingeneralandadministrativeexpensein
ourConsolidatedStatementsofOperations.
Pro-FormaFinancialInformation(unaudited)
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anticipated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EndiciaoccurredonJanuary1,2014:
Year Ended December 31,
2015 2014
Revenue $ 273,055 $ 204,628
(Loss)incomefromoperations  (7,657)  20,820
Net(loss)income  (9,273)  32,536(1)
Basic(loss)earningspershare $ (0.58) $ 2.03
Diluted(loss)earningspershare $ (0.58) $ 1.98
(1) Pro-formanetincomeof$32.5millionin2014includesvaluationallowancereleasesof$13.6million.
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:
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
(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.
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