eFax 2011 Annual Report Download - page 34

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The amounts recorded may differ from the actual income or expense that occurs when the uncertainty is resolved. The estimates that we
make in accounting for contingencies and the gains and losses that we record upon the ultimate resolution of these uncertainties could have a
significant effect on the liabilities and expenses in our financial statements. As of December 31, 2011, we had $0.1 million of non-
income tax
related contingent liabilities.
Allowances for Doubtful Accounts . We reserve for receivables we may not be able to collect. These reserves are typically driven by
the volume of credit card declines and past due invoices and are based on historical experience as well as an evaluation of current market
conditions. On an ongoing basis, management evaluates the adequacy of these reserves.
Recent Accounting Pronouncements
See Note 2 – Basis of Presentation and Summary of Significant Accounting Policies, Recent Accounting Pronouncements –
of our
accompanying consolidated financial statements for a full description of recent accounting pronouncements and our expectations of their impact
on our consolidated financial position and results of operations.
Results of Operations
Years Ended December 31, 2011, 2010 and 2009
The following table sets forth, for the years ended December 31, 2011, 2010 and 2009, information derived from our statements of
operations as a percentage of revenues. This information should be read in conjunction with the accompanying financial statements and the
Notes to Consolidated Financial Statements included elsewhere in this Annual Report on Form 10
-K.
Revenues
Subscriber Revenues.
Subscriber revenues consist of both a fixed monthly recurring subscription component and a variable component that is driven by the
actual usage of our service offerings. Over the past three years, the fixed portion of our subscriber revenues was 81%, 81% and 82% for 2011,
2010 and 2009, respectively. The increase in subscriber revenues over this three-
year period was due primarily to an increase in our subscriber
base offset by the impact of our first quarter 2011 change in estimate relating to remaining service obligations to eFax®
annual subscribers (See
Note 2
–
Basis of Presentation and Summary of Significant Accounting Policies), which reduced subscriber revenues for the year ended
December 31, 2011 by $10.3 million. The increase in our subscriber base resulted from new subscribers due to direct marketing costs for
acquisition of paying subscribers and international sales, business acquisitions and subscribers coming directly to our websites, corporate,
enterprise and government sales, and free-to-paid subscriber upgrades, in each case net of cancellations.
Other Revenues.
Year Ended December 31,
2011
2010
2009
Revenues
100%
100%
100%
Cost of revenues
18
17
18
Gross profit
82
83
82
Operating expenses:
Sales and marketing
18
18
15
Research, development and engineering
5
5
5
General and administrative
18
19
18
Loss on disposal of long-lived asset
—
—
1
Total operating expenses
41
42
39
Operating earnings
41
41
43
Other
-
than
-
temporary impairment losses
—
—
4
Interest and other income
1
3
1
Interest and other expense
—
—
—
Earnings before income taxes
42
44
40
Income tax expense
7
11
13
Net earnings
35%
33%
27%
(in thousands, except
percentages)
2011
2010
2009
Percentage
Change
2011 versus
2010
Percentage
Change
2010 versus
2009
Subscriber Revenues
$
327,953
$
252,492
$
241,922
30%
4%