Attached files
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EX-31.2 - STAMPS.COM INC | v201216_ex31-2.htm |
EX-10.1 - STAMPS.COM INC | v201216_ex10-1.htm |
EX-32.1 - STAMPS.COM INC | v201216_ex32-1.htm |
EX-31.1 - STAMPS.COM INC | v201216_ex31-1.htm |
EX-32.2 - STAMPS.COM INC | v201216_ex32-2.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
þ
|
QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934.
|
For the quarterly period ended
September 30, 2010
OR
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the transition period from ____________ to ____________
Commission
file number: 000-26427
Stamps.com
Inc.
(Exact
name of registrant as specified in its charter)
Delaware
|
77-0454966
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
incorporation
or organization)
|
Identification
No.)
|
12959
Coral Tree Place
Los
Angeles, California 90066
(Address
of principal executive offices, including zip code)
(310)
482-5800
(Registrant’s telephone
number, including area code)
Indicate
by check mark whether the registrant: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes þ No
¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files). Yes ¨ No
¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):
Large
accelerated filer o Accelerated
filer þ
Non-accelerated
filer o
(Do not check if a smaller reporting
company) Smaller reporting company o
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes ¨ No
þ
As of
October 31, 2010, there were approximately 14,345,706 shares of the Registrant’s
Common Stock issued and outstanding.
STAMPS.COM
INC. AND SUBSIDIARY
FORM
10-Q QUARTERLY REPORT FOR THE QUARTER ENDED SEPTEMBER 30, 2010
TABLE
OF CONTENTS
Page
|
||
PART
I - FINANCIAL INFORMATION
|
2
|
|
ITEM
1.
|
FINANCIAL
STATEMENTS
|
2
|
ITEM
2.
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
14
|
ITEM
3.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
22
|
ITEM
4.
|
CONTROLS
AND PROCEDURES
|
22
|
PART
II – OTHER INFORMATION
|
24
|
|
ITEM
1.
|
LEGAL
PROCEEDINGS
|
24
|
ITEM
1A.
|
RISK
FACTORS
|
24
|
ITEM
2.
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
24
|
ITEM
3.
|
DEFAULTS
UPON SENIOR SECURITIES
|
24
|
|
||
ITEM
4.
|
RESERVED
|
24
|
ITEM
5.
|
OTHER
INFORMATION
|
24
|
ITEM
6.
|
EXHIBITS
|
24
|
1
PART
I - FINANCIAL INFORMATION
ITEM
1. FINANCIAL
STATEMENTS
STAMPS.COM
INC. AND SUBSIDIARY
CONSOLIDATED
BALANCE SHEETS
(In
thousands, except per share data)
September
30,
|
December
31,
|
|||||||
2010
|
2009
|
|||||||
(unaudited)
|
||||||||
Assets
|
||||||||
Current
assets:
|
||||||||
Cash and cash
equivalents
|
$ | 32,986 | $ | 45,011 | ||||
Restricted cash
|
— | 554 | ||||||
Short-term
investments
|
10,233 | 2,224 | ||||||
Accounts receivable,
net
|
4,190 | 4,367 | ||||||
Other current
assets
|
3,779 | 3,288 | ||||||
Total current
assets
|
51,188 | 55,444 | ||||||
Property
and equipment, net
|
2,404 | 2,102 | ||||||
Intangible
assets, net
|
897 | 498 | ||||||
Long-term
investments
|
25,109 | 23,956 | ||||||
Deferred
income taxes.
|
7,650 | 3,671 | ||||||
Other
assets
|
2,933 | 3,587 | ||||||
Total assets
|
$ | 90,181 | $ | 89,258 | ||||
Liabilities
and Stockholders’ Equity
|
||||||||
Current
liabilities:
|
||||||||
Accounts payable and accrued
expenses
|
$ | 14,399 | $ | 9,583 | ||||
Deferred revenue
|
4,292 | 4,070 | ||||||
Total
current liabilities
|
18,691 | 13,653 | ||||||
Commitments
and contingencies
|
||||||||
Stockholders’
equity:
|
||||||||
Common stock, $.001 par
value
|
||||||||
Authorized shares: 47,500 in 2010
and 2009
|
||||||||
Issued
shares: 24,551 in 2010 and 24,429 in 2009
|
||||||||
Outstanding shares: 14,284 in 2010
and 15,681 in 2009
|
47 | 47 | ||||||
Additional paid-in
capital
|
633,302 | 630,322 | ||||||
Accumulated
deficit
|
(444,399 | ) | (450,214 | ) | ||||
Treasury
stock, at cost, 10,267 shares in 2010 and 8,748 shares in
2009
|
(118,151 | ) | (104,344 | ) | ||||
Accumulated other comprehensive
income (loss)
|
691 | (206 | ) | |||||
Total
stockholders’ equity
|
71,490 | 75,605 | ||||||
Total liabilities and
stockholders’ equity
|
$ | 90,181 | $ | 89,258 | ||||
The
accompanying notes are an integral part of these consolidated financial
statements.
2
STAMPS.COM
INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF INCOME
(In
thousands, except per share data)
(Unaudited)
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Revenues:
|
||||||||||||||||
Service
|
$ | 15,989 | $ | 15,401 | $ | 48,179 | $ | 45,922 | ||||||||
Product
|
2,736 | 2,536 | 8,618 | 7,733 | ||||||||||||
Insurance
|
496 | 377 | 1,282 | 1,176 | ||||||||||||
PhotoStamps
|
1,449 | 1,901 | 4,766 | 5,609 | ||||||||||||
Other
|
19 | 1 | 22 | 6 | ||||||||||||
Total
revenues
|
20,689 | 20,216 | 62,867 | 60,446 | ||||||||||||
Cost
of revenues:
|
||||||||||||||||
Service
|
3,208 | 2,926 | 9,944 | 8,806 | ||||||||||||
Product
|
993 | 940 | 3,213 | 2,915 | ||||||||||||
Insurance
|
158 | 116 | 390 | 364 | ||||||||||||
PhotoStamps
|
1,145 | 1,542 | 3,595 | 4,363 | ||||||||||||
Total
cost of revenues
|
5,504 | 5,524 | 17,142 | 16,448 | ||||||||||||
Gross
profit
|
15,185 | 14,692 | 45,725 | 43,998 | ||||||||||||
Operating
expenses:
|
||||||||||||||||
Sales
and marketing
|
6,978 | 7,359 | 22,584 | 23,650 | ||||||||||||
Research
and development
|
2,205 | 2,198 | 6,594 | 6,624 | ||||||||||||
General
and administrative
|
3,410 | 3,391 | 9,901 | 9,961 | ||||||||||||
Legal
settlements and reserves
|
- | - | 5,211 | - | ||||||||||||
Total
operating expenses
|
12,593 | 12,948 | 44,290 | 40,235 | ||||||||||||
Income
from operations
|
2,592 | 1,744 | 1,435 | 3,763 | ||||||||||||
Interest
and other income, net
|
219 | 208 | 620 | 797 | ||||||||||||
Income
before taxes
|
2,811 | 1,952 | 2,055 | 4,560 | ||||||||||||
Income
tax expense (benefit)
|
82 | 221 | (3,760 | ) | 555 | |||||||||||
Net
income
|
$ | 2,729 | $ | 1,731 | $ | 5,815 | $ | 4,005 | ||||||||
Net
income per share
|
||||||||||||||||
Basic
|
$ | 0.19 | $ | 0.11 | $ | 0.40 | $ | 0.24 | ||||||||
Diluted
|
$ | 0.19 | $ | 0.11 | $ | 0.39 | $ | 0.24 | ||||||||
Weighted
average shares outstanding
|
||||||||||||||||
Basic
|
14,280 | 16,035 | 14,567 | 16,397 | ||||||||||||
Diluted
|
14,452 | 16,162 | 14,725 | 16,527 |
The
accompanying notes are an integral part of these consolidated financial
statements.
3
STAMPS.COM
INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In
thousands)
(Unaudited)
Nine
Months Ended
September
30,
|
||||||||
2010
|
2009
|
|||||||
Operating
activities:
|
||||||||
Net income
|
$ | 5,815 | $ | 4,005 | ||||
Adjustments to reconcile net
income to net cash provided by operating activities:
|
||||||||
Depreciation and
amortization
|
662 | 925 | ||||||
Stock-based
compensation expense
|
2,193 | 2,387 | ||||||
Deferred
income tax
|
(3,979 | ) | — | |||||
Changes in operating assets and
liabilities:
|
||||||||
Accounts
receivable
|
177 | (959 | ) | |||||
Other
current assets
|
(491 | ) | 988 | |||||
Other
assets
|
654 | 326 | ||||||
Deferred
revenue
|
222 | 463 | ||||||
Accounts payable and accrued
expenses
|
4,416 | (828 | ) | |||||
Net
cash provided by operating activities
|
9,669 | 7,307 | ||||||
Investing
activities:
|
||||||||
Sale of short-term
investments
|
743 | 15,746 | ||||||
Purchase of short-term
investments
|
(8,681 | ) | (2,012 | ) | ||||
Sale of long-term
investments
|
9,334 | 3,542 | ||||||
Purchase
of long-term investments
|
(9,661 | ) | (21,986 | ) | ||||
Release
of restricted cash
|
554 | — | ||||||
Purchase
of property and equipment
|
(963 | ) | (191 | ) | ||||
Net
cash used in investing activities
|
(8,674 | ) | (4,901 | ) | ||||
Financing
activities:
|
||||||||
Proceeds from exercise of stock
options
|
429 | 82 | ||||||
Issuance
of common stock under ESPP
|
358 | 300 | ||||||
Repurchase of common
stock
|
(13,807 | ) | (12,549 | ) | ||||
Net
cash used in financing activities
|
(13,020 | ) | (12,167 | ) | ||||
Net
decrease in cash and cash equivalents
|
(12,025 | ) | (9,761 | ) | ||||
Cash
and cash equivalents at beginning of period
|
45,011 | 52,576 | ||||||
Cash
and cash equivalents at end of period
|
$ | 32,986 | $ | 42,815 |
The accompanying notes are an
integral part of these consolidated financial statements.
4
STAMPS.COM
INC AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL
INFORMATION WITH RESPECT TO SEPTEMBER 30, 2010 AND 2009 IS
UNAUDITED)
1.
|
Summary
of Significant Accounting Policies
|
Basis
of Presentation
We
prepared the financial statements included herein without audit pursuant to the
rules and regulations of the Securities and Exchange Commission (“SEC”). Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with United States (“US”) generally accepted accounting
principles (“GAAP”) have been condensed or omitted pursuant to such rules and
regulations. We believe that the disclosures are adequate to make the
information presented not misleading. We recommend that these financial
statements be read in conjunction with the audited financial statements and the
notes thereto included in our latest annual report on Form 10-K.
In our
opinion, these unaudited financial statements contain all adjustments
(consisting of normal recurring adjustments) necessary to present fairly our
financial position as of September 30, 2010, the results of operations for the
three and nine months ended September 30, 2010 and cash flows for the nine
months ended September 30, 2010. The results of operations for the
interim periods are not necessarily indicative of the results that may be
expected for the year ending December 31, 2010.
Principles
of Consolidation
The
consolidated financial statements include the accounts of Stamps.com Inc. and
PhotoStamps Inc. In October 2009, we formed PhotoStamps Inc., a wholly-owned
subsidiary, for the purpose of managing our retail gift card operations. Because
100% of the voting control is held by us, we have consolidated PhotoStamps Inc.
in the accompanying consolidated financial statements. All significant
intercompany accounts and transactions have been eliminated.
Use
of Estimates and Risk Management
The
preparation of financial statements in conformity with US GAAP requires us to
make estimates and assumptions that affect the amounts reported in the financial
statements and the accompanying notes. Actual results could differ
from those estimates, and such differences may be material to the financial
statements. Examples include estimates of loss contingencies, promotional coupon
redemptions, and deferred income taxes and estimates regarding the useful lives
of patents and other amortizable intangibles.
Contingencies
and Litigation
We are
involved in various litigation matters as a claimant and a defendant. We record
any amounts recovered in these matters when received. We record liabilities for
claims against us when the loss is probable and estimable. Amounts recorded are
based on reviews by outside counsel, in-house counsel and management. Actual
results could differ from estimates.
Fair
Value of Financial Instruments
Carrying
amounts of certain of our financial instruments, including cash, cash
equivalents, restricted cash, accounts receivable, and accounts payable,
approximate fair value due to their short maturities. The fair values of
investments are determined using quoted market prices for those securities or
similar financial instruments.
Reclassifications
Certain
reclassifications have been made to prior year amounts to conform to current
year presentations.
5
STAMPS.COM
INC AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL
INFORMATION WITH RESPECT TO SEPTEMBER 30, 2010 AND 2009 IS
UNAUDITED)
Subsequent
Events
We are
not aware of any material subsequent events or transactions that have occurred
that would require recognition in the financial statements or disclosure in the
notes to the consolidated financial statements.
On
October 28, 2010 we announced that our Board of Directors declared a one-time
special dividend of $2.00 per share to shareholders of record as of the close of
business on November 11, 2010, to be paid on December 2, 2010. The
Board of Directors approved the special dividend to distribute excess cash from
the Company's capital structure, and to allow the Company's shareholders to take
advantage of the current low dividend tax rates. The total amount of
cash distributed in the dividend is expected to be approximately $28.5 million.
We expect to incur one-time expenses of approximately $3 million during the
fourth quarter of 2010 related to the special dividend and its effect on our
employee stock options.
Revenue
Recognition
We
recognize revenue from product sales or services rendered and commissions from
advertising or sale of products by third party vendors to our customer base when
the following four revenue recognition criteria are met: persuasive evidence of
an arrangement exists, delivery has occurred or services have been rendered, the
selling price is fixed or determinable, and collectability is reasonably
assured.
Service
revenue is based on monthly convenience fees and is recognized in the period
that services are provided. Product sales, net of return allowances, are
recorded when the products are shipped and title passes to customers. Sales of
items, including PhotoStamps, sold to customers are made pursuant to a sales
contract that provides for transfer of both title and risk of loss upon our
delivery to the carrier. Return allowances for expected product returns, which
reduce product revenue, are estimated using historical experience. Commissions
from the advertising or sale of products by a third party vendor to our customer
base are recognized when the revenue is earned and collection is deemed
probable.
Customers
pay face value for postage purchased for use through our PC Postage software,
and the funds are transferred directly from the customers to the United States
Postal Service (“USPS”). We do not recognize revenue for this postage, as it is
purchased by our customers directly from the USPS.
PhotoStamps
revenue includes the price of postage and is made pursuant to a sales contract
that provides for transfer of both title and risk of loss upon our delivery to
the carrier.
On a
limited basis, we allow third parties to offer products and promotions to our
customer base. These arrangements generally provide payment in the form of a
flat fee or revenue sharing arrangements where we receive payment upon customers
accessing third party products and services. Total revenue from such advertising
arrangements was not significant during the nine months ended September 30, 2010
and 2009.
We
provide our customers with the opportunity to purchase parcel insurance directly
through our software. Insurance revenue represents the gross amount charged to
the customer for purchasing insurance, and the related cost represents the
amount paid to the insurance broker, Parcel Insurance Plan. We recognize revenue
on insurance purchases upon the ship date of the insured package.
Revenue
from gift cards, which is recognized at the time of redemption, was not
significant to our consolidated financial statements during the three and nine
months ended September 30, 2010 or 2009. Because we do not have meaningful
historical data upon which to base estimates for gift cards that will never be
redeemed (“breakage”), we have not recorded any breakage income related to our
gift card program.
6
STAMPS.COM
INC AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL
INFORMATION WITH RESPECT TO SEPTEMBER 30, 2010 AND 2009 IS
UNAUDITED)
2.
|
Legal
Proceedings
|
On July
27, 2010, we entered into binding terms of a settlement agreement with Kara
Technology Incorporated and Mr. Salim Kara to resolve all outstanding litigation
among the parties. On October 6, 2010, we entered into the final form of the
settlement agreement with Kara Technology Incorporated and Mr. Salim
Kara. Under the terms of the agreement, we made a $5.1 million
payment for settlement of all claims asserted in the litigation, purchased the
patents asserted in the litigation for $0.4 million, and granted Mr. Salim Kara
options on 35,000 shares of Stamps.com stock. Mr. Kara also agreed to
cooperate with us in the prosecution and enforcement of any patents on which he
is named as an inventor, including the patents asserted in the Stamps.com vs.
Endicia litigation matters. Because the events that gave rise to the
litigation occurred prior to June 30, 2010 and the settlement was reached before
our financial statements were released, an accrual for the $5.1 million
settlement expense was included in the financial results for the second quarter
of 2010, and the purchase of the patents will be amortized over the remaining
useful life of the patents.
On
November 22, 2006, we filed a lawsuit against Endicia, Inc. and PSI Systems,
Inc. in the United States District Court for the Central District of California
for infringement of eleven of our patents covering, among other things, Internet
postage technology. We seek an injunction, unspecified damages, and attorneys’
fees. On November 10, 2008, we were required to select fifteen claims (from over
six hundred claims available) to be the subject of the trial. On November 9,
2009, the Court granted the summary judgment motion of Endicia, Inc. and PSI
Systems, Inc. that the fifteen claims we selected are invalid. We have filed an
appeal.
On August
8, 2008, PSI Systems, Inc. filed a lawsuit against us in the same court,
alleging that we infringed three PSI Systems patents related to Internet postage
technology. PSI Systems seeks an injunction, unspecified damages, and attorneys’
fees. On September 16, 2008, we filed counterclaims for infringement of four
more of our patents. In our counterclaim, we seek an injunction, unspecified
damages, and attorneys’ fees. The Court issued a “Markman order” to determine
the meaning of the claims on May 14, 2010. The Court has not scheduled a trial
commencement date.
In 2001,
we were named, together with certain of our current and former board members
and/or officers, as a defendant in several purported class-action lawsuits,
filed in the U.S. District Court for the Southern District of New York. The
lawsuits allege violations of the Securities Act of 1933 and the Securities
Exchange Act of 1934 in connection with our initial public offering and a
secondary offering of our common stock. Plaintiffs seek damages and statutory
compensation, including interest, costs and expenses (including attorneys’
fees). In October 2009, the court approved a settlement of this action, which
does not require us to make any payments. The court approval has been
appealed.
We are
subject to various other routine legal proceedings and claims incidental to our
business, and we do not believe that these proceedings and claims would
reasonably be expected to have a material adverse effect on our financial
position, results of operations or cash flows.
3.
|
Net
Income per Share
|
Net
income per share represents net income attributable to common stockholders
divided by the weighted average number of common shares outstanding during a
reported period. The diluted net income per share reflects the potential
dilution that could occur if securities or other contracts to issue common
stock, including stock options (commonly and hereafter referred to as “common
stock equivalents”), were exercised or converted into common stock. Diluted net
income per share is calculated by dividing net income during a reported period
by the sum of the weighted average number of common shares outstanding plus
common stock equivalents for the period. The following table
reconciles share amounts utilized to calculate basic and diluted net income per
share (in thousands, except per share data):
7
STAMPS.COM
INC AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL
INFORMATION WITH RESPECT TO SEPTEMBER 30, 2010 AND 2009 IS
UNAUDITED)
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Net
income
|
$ | 2,729 | $ | 1,731 | $ | 5,815 | $ | 4,005 | ||||||||
Basic
- weighted average common shares
|
14,280 | 16,035 | 14,567 | 16,397 | ||||||||||||
Diluted
effect of common stock equivalents
|
172 | 127 | 158 | 130 | ||||||||||||
Diluted
- weighted average common shares
|
14,452 | 16,162 | 14,725 | 16,527 | ||||||||||||
Earnings
per share:
|
||||||||||||||||
Basic
|
$ | 0.19 | $ | 0.11 | $ | 0.40 | $ | 0.24 | ||||||||
Diluted
|
$ | 0.19 | $ | 0.11 | $ | 0.39 | $ | 0.24 |
The
calculation of dilutive shares excludes the effect of the following options that
are considered anti-dilutive (in thousands):
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Anti-dilutive
stock option shares
|
2,046 | 2,674 | 2,207 | 2,714 | ||||||||||||
4.
|
Stock-Based
Employee Compensation
|
We are
required to estimate the fair value of share-based payment awards on the date of
grant using an option-pricing model and to recognize stock-based compensation
expense during each period based on the value of that portion of share-based
payment awards that is ultimately expected to vest during the period, reduced
for estimated forfeitures. We estimate forfeitures at the time of grant based on
historical data and revise, if necessary, in subsequent periods if actual
forfeitures differ from those estimates. Compensation expense recognized for all
employee stock options granted is recognized using the straight-line single
method over their respective vesting periods of three to five
years.
The
following table sets forth the stock-based compensation expense that we
recognized for the periods indicated (in thousands):
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Stock-based
compensation expense relating to:
|
||||||||||||||||
Employee
and director stock options
|
$ | 689 | $ | 747 | $ | 2,078 | $ | 2,334 | ||||||||
Employee
stock purchases
|
82 | 28 | 115 | 53 | ||||||||||||
Total
stock-based compensation expense
|
$ | 771 | $ | 775 | $ | 2,193 | $ | 2,387 |
Stock-based
compensation expense relating to:
|
||||||||||||||||
Cost
of revenues
|
$ | 81 | $ | 71 | $ | 202 | $ | 211 | ||||||||
Sales
and marketing
|
199 | 197 | 552 | 586 | ||||||||||||
Research
and development
|
173 | 175 | 452 | 503 | ||||||||||||
General
and administrative
|
318 | 332 | 987 | 1,087 | ||||||||||||
Total
stock-based compensation expense
|
$ | 771 | $ | 775 | $ | 2,193 | $ | 2,387 |
8
STAMPS.COM
INC AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL
INFORMATION WITH RESPECT TO SEPTEMBER 30, 2010 AND 2009 IS
UNAUDITED)
We use
the Black-Scholes option valuation model to estimate the fair value of
share-based payment awards on the date of grant, which requires us to make a
number of highly complex and subjective assumptions, including stock price
volatility, expected term, risk-free interest rates and actual and projected
employee stock option exercise behaviors. In the case of options we grant, our
assumption of expected volatility was based on the historical volatility of our
stock price. We base the risk-free interest rate on US Treasury zero-coupon
issues with a remaining term equal to the expected life assumed at the date of
grant. The estimated expected life represents the weighted-average
period the stock options are expected to remain outstanding determined based on
an analysis of historical exercise behavior.
The
following are the weighted average assumptions used in the Black-Scholes
valuation model for the periods indicated:
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Expected
dividend yield
|
— | — | — | — | ||||||||||||
Risk-free
interest rate
|
1.6 | % | — | 1.9 | % | 2.2 | % | |||||||||
Expected
volatility
|
49 | % | — | 50 | % | 53 | % | |||||||||
Expected
life (in years)
|
4.5 | — | 4.5 | 4.5 | ||||||||||||
Expected
forfeiture rate
|
20 | % | — | 20 | % | 20 | % |
We did
not grant any stock options in the third quarter of 2009.
5.
|
Intangible
Assets
|
We have
amortizable and non-amortizable intangible assets consisting of patents,
trademarks and other intellectual property with a gross carrying value of $8.7
million and $8.3 million as of September 30, 2010 and December 31, 2009,
respectively. Accumulated amortization was $7.8 million as of
September 30, 2010 and December 31, 2009. The expected useful lives of our
amortizable intangible assets range from 4 to 17 years. During
2009, we assessed whether events or changes in circumstances occurred that could
potentially indicate that the carrying amount of our intangible assets may not
be recoverable. We concluded that there were no such events or changes in
circumstances during 2009 and determined that the fair value of our intangible
assets were in excess of their carrying value as of December 31, 2009. Aggregate
amortization expense on patents and trademarks was not material to our
consolidated financial statements for the three and nine months ended September
30, 2010 and 2009. Our aggregate amortization expense for the next five years is
approximately $229,000.
6.
|
Comprehensive
Income
|
The
following table provides the data required to calculate comprehensive income (in
thousands):
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Net
income
|
$ | 2,729 | $ | 1,731 | $ | 5,815 | $ | 4,005 | ||||||||
Unrealized
gain on investments
|
276 | 44 | 897 | 870 | ||||||||||||
Comprehensive
income
|
$ | 3,005 | $ | 1,775 | $ | 6,712 | $ | 4,875 |
9
STAMPS.COM
INC AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL
INFORMATION WITH RESPECT TO SEPTEMBER 30, 2010 AND 2009 IS
UNAUDITED)
7.
|
Income
Taxes
|
During
the three and nine months ended September 30, 2010, our income tax expense
consisted of both federal and state alternative minimum tax. Our effective
income tax rate differs from the statutory income tax rate primarily as a result
of our use of net operating losses (NOLs) to offset current federal and state
tax expense. A valuation allowance was originally recorded against our deferred
tax assets because we determined that the realization of these assets did not
meet the more likely than not criteria, and we review that allowance and have
adjusted it as appropriate. During the second quarter of 2010, we recorded an
income tax benefit of approximately $4.0 million when we determined that a
release of a portion of our remaining valuation allowance was appropriate as a
result of (i) the attainment of five consecutive years of taxable income from
2005 to 2009 and (ii) a material decline in our Section 382 ownership shift
under Internal Revenue Code Section 382 from approximately 34% as of March 31,
2010 to approximately 24% as of June 30, 2010. In making this determination, we
considered the available positive and negative evidence, including our recent
earnings trend and expected continued future taxable income. As of
September 30, 2010, we continued to maintain a valuation allowance for the
remainder of our deferred tax assets.
In
September 2008, the State of California passed legislation temporarily
suspending the use of NOLs to offset current state income tax expense for the
tax years 2008 and 2009. As a result of not being able to use our state NOLs in
these years, we incurred approximately $210,000 and $468,000 of additional
California state income tax expense during the three and nine months ended
September 30, 2009, respectively. During the three and nine months ended
September 30, 2010, we recorded a tax provision for corporate alternative
minimum taxes of approximately $82,000 and $219,000, respectively. However; in
October 2010, the State of California passed legislation temporarily suspending
the use of NOLs to offset current state income tax expense for the tax years
2010 and 2011.
8.
|
Fair
Value Measurements
|
Financial
assets measured at fair value on a recurring basis are classified in one of the
three following categories, which are described below:
|
Level
1 - Valuations based on unadjusted quoted prices for identical assets in
an active market
|
|
Level
2 - Valuations based on quoted prices in markets where trading occurs
infrequently or whose values are based on quoted prices of instruments
with similar attributes in active
markets
|
|
Level
3 - Valuations based on inputs that are unobservable and involve
management judgment and our own assumptions about market participants and
pricing
|
10
STAMPS.COM
INC AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL
INFORMATION WITH RESPECT TO SEPTEMBER 30, 2010 AND 2009 IS
UNAUDITED)
The
following table summarizes our financial assets measured at fair value on a
recurring basis (in thousands):
Fair
Value Measurement at Reporting Date Using
|
||||||||||||||||
Description
|
September
30, 2010
|
Quoted
Prices in Active Markets for Identical Assets
(Level
1)
|
Significant
Other Observable Inputs
(Level
2)
|
Significant
Unobservable Inputs
(Level
3)
|
||||||||||||
Cash
equivalents
|
$ | 32,986 | $ | 32,986 | $ | — | $ | — | ||||||||
Available-for-sale
debt securities
|
||||||||||||||||
Asset-backed
securities
|
4,378 | — | 4,378 | — | ||||||||||||
Corporate
bonds
|
29,925 | — | 29,925 | — | ||||||||||||
US
Treasury
|
1,039 | 1,039 | — | — | ||||||||||||
Total
|
$ | 68,328 | $ | 34,025 | $ | 34,303 | $ | — |
The fair
value of our available-for-sale debt securities included in the Level 2 category
is based on the market values obtained from an independent pricing service that
were evaluated using pricing models that vary by asset class and may incorporate
available trade, bid and other market information and price quotes from well
established independent pricing vendors and broker-dealers.
There
were no non-financial assets or liabilities that were required to be measured at
fair value as of September 30, 2010.
9.
|
Cash
Equivalents and Investments
|
Our cash
equivalents and investments consist of money market securities, asset-backed
securities and US treasury and public corporate debt securities at September 30,
2010 and December 31, 2009. We consider all highly liquid investments with an
original or remaining maturity of three months or less at the date of purchase
to be cash equivalents. All of our investments are classified as available for
sale and are recorded at market value using the specific identification method.
Realized gains and losses are reflected in other income using the specific
identification method. There was no material realized gain or loss with respect
to our investments during the third quarter of 2010. Unrealized gains and losses
are included as a separate component of stockholders' equity. We have 6
securities with a total fair value of $1.4 million that have unrealized losses
of approximately $42,000 as of September 30, 2010. The following table
summarizes realized gains and losses for the period indicated (in
thousands):
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Realized
gain
|
$ | 2 | $ | — | $ | 12 | $ | 36 | ||||||||
Realized
loss
|
— | — | — | (5 | ) | |||||||||||
Net
realized gain
|
$ | 2 | $ | — | $ | 12 | $ | 31 | ||||||||
On at
least a quarterly basis, we evaluate our available for sale securities, and
record an “other-than-temporary impairment” (“OTTI”) if we believe their fair
value is less than historical cost, and it is probable that we will not collect
all contractual cash flows. We did not record any OTTI during the three and nine
months ended September 30, 2010, after evaluating a number of factors including,
but not limited to:
·
|
How
much fair value has declined below amortized
cost
|
·
|
The
financial condition of the issuers
|
·
|
Significant
rating agency changes on the issuer
|
·
|
Our
intent and ability to hold the security for a period of time sufficient to
allow for any anticipated recovery in fair
value
|
11
STAMPS.COM
INC AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL
INFORMATION WITH RESPECT TO SEPTEMBER 30, 2010 AND 2009 IS
UNAUDITED)
The
following table summarizes our cash, cash equivalents, restricted cash and
investments as of September 30, 2010 and December 31, 2009 (in
thousands):
September
30, 2010
|
||||||||||||||||
Cost
or
|
Gross
|
Gross
|
||||||||||||||
Amortized
|
Unrealized
|
Unrealized
|
Estimated
|
|||||||||||||
Cost
|
Gains
|
Losses
|
Fair
Value
|
|||||||||||||
Cash
equivalents:
|
||||||||||||||||
Cash
|
$ | 13,345 | $ | - | $ | - | $ | 13,345 | ||||||||
Money
market
|
19,641 | - | - | 19,641 | ||||||||||||
Cash
and cash equivalents
|
32,986 | - | - | 32,986 | ||||||||||||
Short-term
investments:
|
||||||||||||||||
Corporate
notes and bonds
|
10,159 | 89 | (15 | ) | 10,233 | |||||||||||
Short-term
investments
|
10,159 | 89 | (15 | ) | 10,233 | |||||||||||
Long-term
investments:
|
||||||||||||||||
Corporate
bonds and asset backed securities
|
23,479 | 619 | (28 | ) | 24,070 | |||||||||||
US
Treasury
|
1,014 | 25 | - | 1,039 | ||||||||||||
Long-term
investments
|
24,493 | 644 | (28 | ) | 25,109 | |||||||||||
Cash
equivalents and investments
|
$ | 67,638 | $ | 733 | $ | (43 | ) | $ | 68,328 |
December
31, 2009
|
||||||||||||||||
Cost
or
|
Gross
|
Gross
|
||||||||||||||
Amortized
|
Unrealized
|
Unrealized
|
Estimated
|
|||||||||||||
Cost
|
Gains
|
Losses
|
Fair
Value
|
|||||||||||||
Cash
equivalents:
|
||||||||||||||||
Cash
|
$ | 9,132 | $ | - | $ | - | $ | 9,132 | ||||||||
Money
market
|
35,879 | - | - | 35,879 | ||||||||||||
Cash
and cash equivalents
|
45,011 | - | - | 45,011 | ||||||||||||
Restricted
cash:
|
||||||||||||||||
Corporate
notes and bonds
|
554 | - | - | 554 | ||||||||||||
Restricted
cash
|
554 | - | - | 554 | ||||||||||||
Short-term
investments:
|
||||||||||||||||
Corporate
notes and bonds
|
2,221 | 17 | (14 | ) | 2,224 | |||||||||||
Short-term
investments
|
2,221 | 17 | (14 | ) | 2,224 | |||||||||||
Long-term
investments:
|
||||||||||||||||
Corporate
bonds and asset backed securities
|
24,165 | 250 | (459 | ) | 23,956 | |||||||||||
Long-term
investments
|
24,165 | 250 | (459 | ) | 23,956 | |||||||||||
Cash
equivalents, restricted cash and investments
|
$ | 71,951 | $ | 267 | $ | (473 | ) | $ | 71,745 |
12
STAMPS.COM
INC AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL
INFORMATION WITH RESPECT TO SEPTEMBER 30, 2010 AND 2009 IS
UNAUDITED)
The
following table summarizes contractual maturities of our marketable fixed-income
securities as of September 30, 2010 (in thousands):
Amortized
Cost
|
Estimated
Fair
Value
|
|||||||
Due
within one year
|
$ | 10,159 | $ | 10,233 | ||||
Due
after one year through five years
|
23,187 | 23,817 | ||||||
Due
after five years through ten years
|
1,306 | 1,292 | ||||||
Total
|
$ | 34,652 | $ | 35,342 |
13
ITEM
2.
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
This
Quarterly Report on Form 10-Q contains "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
“Securities Act”), and Section 21E of the Securities Exchange Act of
1934, as amended (the “Exchange Act”). These statements relate to
expectations concerning matters that are not historical
facts. You can find many (but not all) of these statements by
looking for words such as “approximates,” “believes,” “expects,” “anticipates,”
“estimates,” “intends,” “plans,” “would,” “may” or other similar expressions in
this report. We claim the protection of the safe harbor contained in
the Private Securities Litigation Reform Act of 1995. We caution
investors that any forward-looking statements presented in this report, or that
we may make orally or in writing from time to time, are based on beliefs and
assumptions made by, and information currently available to, us. Such
statements are based on assumptions, and the actual outcome will be affected by
known and unknown risks, trends, uncertainties and factors that are beyond our
control or ability to predict. Although we believe that our assumptions are
reasonable, they are not guarantees of future performance, and some will
inevitably prove to be incorrect. As a result, our actual future results may
differ from our expectations, and those differences may be material. We are not
undertaking any obligation to update any forward-looking statements.
Accordingly, investors should use caution in relying on past forward-looking
statements, which are based on known results and trends at the time they are
made, to anticipate future results or trends.
Please
refer to the risk factors under “Item 1A. Risk Factors” of our Form 10-K for the
year ended December 31, 2009 as well as those described elsewhere in our public
filings. The risks included are not exhaustive, and additional
factors could adversely affect our business and financial
performance. We operate in a very competitive and rapidly changing
environment. New risk factors emerge from time to time, and it is not possible
for management to predict all such risk factors, nor can it assess the impact of
all such risk factors on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements.
Stamps.com,
NetStamps, PhotoStamps, Hidden Postage, Stamps.com Internet postage and the
Stamps.com logo are our trademarks. This report also references
trademarks of other entities.
For
ease of presentation, all dollar figures in excess of $1 million are rounded to
the nearest $100,000 and all figures under $1 million are rounded to the nearest
$1,000; all percentages are rounded to the nearest percent unless otherwise
shown.
SPECIAL
NOTICE REGARDING PURCHASES OF MORE THAN 5% OF OUR STOCK
We
currently have federal and state net operating loss (“NOL”) carry-forwards of
approximately $220 million and $140 million, respectively. Under Internal
Revenue Code Section 382 rules, if a “change of ownership” is triggered, our NOL
asset may be impaired. A change in ownership can occur whenever there is a shift
in ownership by more than 50 percentage points by one or more “5% shareholders”
within a three-year period.
Under our
certificate of incorporation, any person, or entity, including any company and
investment firm, that wishes to become a “5% shareholder” (as defined in our
certificate of incorporation) must first obtain a waiver from our board of
directors. In addition, any person, including any company and investment firm,
that is already a “5% shareholder” of ours cannot make any additional purchases
of our stock without a waiver from our board of directors. The NOL
protective provisions contained in our certificate of incorporation (the “NOL
Protective Measures”) are more specifically described in our Definitive Proxy
filed with the Securities and Exchange Commission on April 2, 2008.
On July 22, 2010, our Board of
Directors suspended the NOL Protective Measures by approving a waiver from the
NOL Protective Measures to all persons and entities, including companies and
investment firms. As a result, our stockholders are now allowed to
become “5% shareholders” and existing “5% shareholders” are allowed to make
additional purchases of our stock each without having to comply with the
restrictions contained in the NOL Protective Measures. For complete
details about this waiver from the NOL Protective Measures, please see our Form
8-K filed on July 28, 2010.
14
Overview
Stamps.comÒ is the leading provider of
Internet-based postage solutions. Our customers use our service to
mail and ship a variety of mail pieces, including postcards, envelopes, flats
and packages, using a wide range of United States Postal Service (the “USPS”)
mail classes, including First Class Mail®, Priority Mail®, Express Mail®, Media
Mail®, Parcel Post®, and others. Our customers include individuals, small
businesses, home offices, medium-size businesses and large enterprises, and
within these segments we target both mailers and shippers. We
were the first ever USPS-licensed vendor to offer PC Postage® in a software-only
business model in 1999.
Services
and Products
We offer
the following products and services to our customers
Ÿ
|
PC Postage Service. Our
USPS-approved PC Postage service enables users to print “electronic
stamps” directly onto envelopes, plain paper, or labels using only a
standard personal computer, printer and Internet connection. Our service
currently supports a variety of USPS and international mail classes.
Customers can also add USPS Special Services such as Delivery
Confirmation™, Signature Confirmation™, Registered Mail, Certified Mail,
Insured Mail, Return Receipt, Collect on Delivery and Restricted Delivery
to their mail pieces. After installing our software and completing the
registration process, customers can purchase and print postage 24 hours a
day, seven days a week. When a customer purchases postage for use through
our service, the customer pays face value, and the funds are transferred
directly from the customer’s account to the USPS’s
account.
|
In
addition to postage purchases, customers pay us a monthly service fee ranging
from $15.99 to $39.99 depending on the features and capabilities of the
particular service. Our Pro Plan offers a basic set of Stamps.com mailing &
shipping features with a single-user capability. Our Premiere plan
for larger small businesses adds multiple-user functionality, automated
Certified Mail forms, FedEx label printing, additional reference codes and
higher allowable postage balances to our Pro Plan feature set. Our Professional
Shipper plan is targeted to higher volume shippers such as fulfillment houses,
retailers and e-commerce merchants and features direct integration into a
customer’s order databases, faster label printing speed, the ability to
customize and save shipping profiles, and integrations with many of the
industry’s leading shipping management systems. We have launched shipping
integrations with several of these e-commerce focused companies over the past
year. While these integrations have not had a material impact on our financial
results to date, we believe they have the potential to be material in the
future. Our Enterprise service is targeted to organizations with multiple
geographic locations and features enhanced reporting that allows a central
location such as a corporate headquarters greater visibility and control over
postage expenditures across their network of locations.
Our
software integrates directly into the most popular e-commerce platforms,
allowing webstore managers to completely automate their order fulfillment
process to process, manage, and ship orders from virtually any e-commerce source
from a single interface without manual data entry. Managers can retrieve order
data and print complete shipping labels for all USPS mail classes including
First Class International®.
In July
2010 we launched a partnership with Amazon.com that makes our domestic and
international shipping labels available to Amazon.com Marketplace users.
The service allows customers to automatically pay for postage using their
Marketplace Payments account, to set a default ship-from address so they don’t
have to type or write it for each shipment, and to automatically populate the
ship-to address on the label. Domestic and international mail classes are
supported, and Marketplace users may request carrier pickup from USPS. A
transaction fee is charged to customers for each label printed at $0.07 per
label.
Our
customers can print postage (i) on NetStamps® labels, which can be used just
like regular stamps, (ii) directly on envelopes, postcards or on other types of
mail or labels, in a single-step process that saves time and provides a
professional look, (iii) on plain 8.5” x 11” paper or on special labels for
packages, and (iv) on integrated customs forms for international mail and
packages. For added convenience, our PC Postage services incorporate
address verification technology that verifies each destination address for mail
sent using our service against a database of all known addresses in the United
States. Our PC Postage service is also integrated with common small
business and productivity software applications such as word processing, contact
and address management, and accounting and financial applications. We
also offer several different versions of NetStamps, such as Themed NetStamps and
Photo NetStamps that allow customers to add stock or full custom designs to
their mail while still providing the same NetStamps convenience of printing and
using postage whenever it is needed.
15
·
|
PhotoStamps®. In May 2009, we
successfully completed the market test of our PhotoStamps product.
PhotoStamps is a patented form of postage that allows consumers to turn
digital photos, designs or images into valid US postage. With this
product, individuals or businesses can create customized US postage using
pictures of their children, pets, vacations, celebrations, business logos
and more. PhotoStamps can be used as regular postage to send letters,
postcards or packages. The product is available via our
separately-marketed website at www.photostamps.com. Customers upload a
digital photograph or image file, customize the look and feel by choosing
a border color to complement the photo, select the value of postage, and
place the order online. Each sheet includes 20 individual PhotoStamps, and
orders arrive via US Mail in a few business days. We do not include our
PhotoStamps business when we refer to our PC Postage
business.
|
·
|
Mailing & Shipping
Supplies Store. Our Mailing & Shipping Supplies Store (our
“Supplies Store”) is available to our customers from within our PC Postage
software and sells NetStamps labels, shipping labels, other mailing
labels, dedicated postage printers, scales, and other mailing and
shipping-focused office supplies. Our Supplies Store features a store
catalog, same day shipping capabilities, messaging of our free or
discounted shipping promotions, cross sell during checkout, product search
capabilities, and expedited and rush shipping
options.
|
·
|
Branded Insurance. We
offer Stamps.com branded insurance to our customers so that they may
insure their mail or packages in a fully integrated, online process that
eliminates any trips to the post office or the need to complete any
special forms. Our branded insurance is provided in partnership with
Parcel Insurance Plan and is underwritten by Fireman's Fund. We also offer
official USPS insurance alongside our branded insurance
product.
|
Results
of Operations
Total
revenue in the third quarter of 2010 was $20.7 million, an increase of 2% from
$20.2 million in the third quarter of 2009. Total revenue during the
nine months ended September 30, 2010 was $62.9 million, an increase of 4% from
$60.4 million during the nine months ended September 30, 2009. PC
Postage revenue, including service revenue, product revenue and insurance
revenue, in the third quarter of 2010 was $19.2 million, an increase of 5% from
$18.3 million in the third quarter of 2009, and was $58.1 million in the nine
months ended September 30, 2010, an increase of 6% from $54.8 million in the
nine months ended September 30, 2009. PhotoStamps revenue in the
third quarter of 2010 was $1.4 million, a decrease of 24% from $1.9 million in
the third quarter of 2009, and was $4.8 million in the nine months ended
September 30, 2010, a decrease of 15% from $5.6 million in the nine months ended
September 30, 2009. The following table sets forth the breakdown of
revenue for the three and nine months ended September 30, 2010 and 2009 and the
resulting percentage change (revenue in thousands):
Three
months ended September 30,
|
Nine
months ended September 30,
|
|||||||||||||||||||||||
2010
|
2009
|
%
Change
|
2010
|
2009
|
%
Change
|
|||||||||||||||||||
Service
revenue
|
$ | 15,989 | $ | 15,401 | 4 | % | $ | 48,179 | $ | 45,922 | 5 | % | ||||||||||||
Product
revenue
|
2,736 | 2,536 | 8 | % | 8,618 | 7,733 | 11 | % | ||||||||||||||||
Insurance
revenue
|
496 | 377 | 32 | % | 1,282 | 1,176 | 9 | % | ||||||||||||||||
PC
postage revenue
|
$ | 19,221 | 18,314 | 5 | % | $ | 58,079 | $ | 54,831 | 6 | % | |||||||||||||
PhotoStamps
revenue
|
$ | 1,449 | $ | 1,901 | (24 | %) | $ | 4,766 | $ | 5,609 | (15 | %) | ||||||||||||
Other
revenue
|
19 | 1 | 1800 | % | 22 | 6 | 267 | % | ||||||||||||||||
Total
revenue
|
$ | 20,689 | $ | 20,216 | 2 | % | $ | 62,867 | $ | 60,446 | 4 | % |
We use
several PC Postage marketing channels to acquire customers, including
partnerships, online advertising, affiliate channel, direct mail, traditional
media advertising and others. Beginning in 2007, we significantly increased our
investment in our non-enhanced promotion marketing channels based on our
estimated high return-on-investment in that area, and we continued to increase
our investment in 2010 as our estimated return-on-investment continued to be
attractive. Primarily as a result of these decisions, PC Postage
revenue for customers acquired through our non-enhanced promotion channels was
$18.2 million in the third quarter of 2010, an increase of 8% from $16.8 million
in the third quarter of 2009, and was $54.5 million in the nine months ended
September 30, 2010, an increase of 9% from $50.0 million in the nine months
ended September 30, 2009.
16
In the
enhanced promotion channel, we work with various companies to advertise our
service in a variety of sites on the Internet. These companies typically offer
an additional promotion (beyond what we typically offer) directly to the
customer in order to get the customer to try our service. We have
been reducing our investment in this area over the last few years, which reduced
our revenue for customers acquired through this channel to $1.1 million in the
third quarter of 2010, a decrease of 32% from $1.6 million in the third quarter
of 2009, and to $3.6 million in the nine months ended September 30, 2010, a
decrease of 27% from $4.9 million in the nine months ended September 30,
2009.
The
following table sets forth the breakdown of PC Postage revenue between customers
acquired through our non-enhanced promotion channels and customers acquired
through our enhanced promotion channels for the three and nine months ended
September 30, 2010 and 2009 and the resulting percent change (revenue in
thousands):
Three
months ended
September
30,
|
Nine
months ended
September
30,
|
|||||||||||||||||||||||
2010
|
2009
|
%
Change
|
2010
|
2009
|
%
Change
|
|||||||||||||||||||
Non-enhanced
promotion revenue
|
$ | 18,157 | $ | 16,752 | 8 | % | $ | 54,494 | $ | 49,954 | 9 | % | ||||||||||||
Enhanced
promotion revenue
|
1,064 | 1,562 | (32 | )% | 3,585 | 4,877 | (27 | )% | ||||||||||||||||
PC
postage revenue
|
$ | 19,221 | $ | 18,314 | 5 | % | $ | 58,079 | $ | 54,831 | 6 | % |
The
increase in revenue from customers acquired through our non-enhanced promotion
channels was driven by both an increase in paid customers and an increase in
average monthly revenue per paid customer.
The
number of paid customers originally acquired through our non-enhanced promotion
channels during the third quarter of 2010 was approximately 334,000, an increase
of 6% from approximately 315,000 in the third quarter of 2009. We
define paid customers for the quarter as ones from whom we successfully
collected service fees at least once during that quarter.
The 6%
increase in paid customers over the past year was attributable to both increased
customer acquisition and reduced churn in these channels. We believe the
increased customer acquisition was primarily attributable to increased customer
acquisition spending and improvements in the economic environment. We believe
the decreased churn rates were primarily attributable to increased usage of our
service and improvements in the economic environment.
For
customers originally acquired through our non-enhanced promotion channels, our
average monthly revenue per paid customer for the third quarter of 2010 was
$18.13, an increase of 2% compared to $17.72 for the third quarter of
2009. We believe the increase in average monthly revenue per paid
customer was partially attributable to an increase in the average store and
insurance revenue per paid customer driven by increased usage of our service and
partially attributable to having a larger number of customers on higher priced
plans.
17
The
following table sets forth our results of operations as a percentage of total
revenue for the periods indicated:
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Total
Revenues
|
||||||||||||||||
Service
|
77.3 | % | 76.2 | % | 76.6 | % | 76.0 | % | ||||||||
Product
|
13.2 | % | 12.5 | % | 13.7 | % | 12.8 | % | ||||||||
Insurance
|
2.4 | % | 1.9 | % | 2.1 | % | 1.9 | % | ||||||||
PhotoStamps
|
7.0 | % | 9.4 | % | 7.6 | % | 9.3 | % | ||||||||
Other
|
0.1 | % | 0.0 | % | 0.0 | % | 0.0 | % | ||||||||
Total
revenues
|
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Cost
of revenues:
|
||||||||||||||||
Service
|
15.5 | % | 14.5 | % | 15.8 | % | 14.6 | % | ||||||||
Product
|
4.8 | % | 4.6 | % | 5.1 | % | 4.8 | % | ||||||||
Insurance
|
0.8 | % | 0.6 | % | 0.6 | % | 0.6 | % | ||||||||
PhotoStamps
|
5.5 | % | 7.6 | % | 5.7 | % | 7.2 | % | ||||||||
Total
cost of revenues
|
26.6 | % | 27.3 | % | 27.2 | % | 27.2 | % | ||||||||
Gross
profit
|
73.4 | % | 72.7 | % | 72.8 | % | 72.8 | % | ||||||||
Operating
expenses:
|
||||||||||||||||
Sales
and marketing
|
33.7 | % | 36.4 | % | 35.9 | % | 39.1 | % | ||||||||
Research and
development
|
10.7 | % | 10.9 | % | 10.5 | % | 11.0 | % | ||||||||
General
and administrative
|
16.5 | % | 16.8 | % | 15.8 | % | 16.5 | % | ||||||||
Legal settlements and
reserves
|
0.0 | % | 0.0 | % | 8.3 | % | 0.0 | % | ||||||||
Total operating
expenses
|
60.9 | % | 64.1 | % | 70.5 | % | 66.6 | % | ||||||||
Income
from operations
|
12.5 | % | 8.6 | % | 2.3 | % | 6.2 | % | ||||||||
Interest
income and other income, net
|
1.1 | % | 1.0 | % | 1.0 | % | 1.3 | % | ||||||||
Income
before taxes
|
13.6 | % | 9.6 | % | 3.3 | % | 7.5 | % | ||||||||
Income
tax expense (benefit)
|
0.4 | % | 1.1 | % | (6.0 | %) | 0.9 | % | ||||||||
Net
income
|
13.2 | % | 8.5 | % | 9.3 | % | 6.6 | % |
Revenue
Our
revenue was derived primarily from five sources: (1) service and
transaction fees charged to customers for use of our PC Postage service
(“service revenue”); (2) product revenue from the direct sale of consumables and
supplies through our Supplies Store; (3) insurance revenue from our branded
insurance offering; (4) PhotoStamps revenue from our PhotoStamps business; and
(5) other revenue, consisting of advertising revenue derived from advertising
programs with our existing customers.
Service
revenue increased 4% to $16.0 million in the third quarter of 2010 from
$15.4 million in the third quarter of 2009 and increased 5% to $48.2
million in the nine months ended September 30, 2010 from $45.9 million in the
nine months ended September 30, 2009. The 4% increase in service revenue during
the third quarter of 2010 consisted of an 8% increase in service revenue from
customers acquired through our non-enhanced promotion channels, partly offset by
a 32% decrease in service revenue from customers acquired through our enhanced
promotion channel. The 5% increase in service revenue during the nine months
ended September 30, 2010 consisted of an 8% increase in service revenue from
customers acquired through our non-enhanced promotion channels, partly offset by
a 26% decrease in service revenue from customers acquired through our enhanced
promotion channel. As a percentage of total revenue, service revenue increased
one percentage point to 77% in the third quarter of 2010 from 76% in the third
quarter of 2009 and increased one percentage point to 77% in the nine months
ended September 30, 2010 from 76% in the nine months ended September 30,
2009.
18
Product
revenue increased 8% to $2.7 million in the third quarter of 2010 from $2.5
million in the third quarter of 2009 and increased 11% to $8.6 million in the
nine months ended September 30, 2010 from $7.7 million in the nine months ended
September 30, 2009. The increase was primarily attributable to the following:
(1) growth in our paid customer base; (2) marketing our Supplies Store to our
existing customer base; (3) the additional SKUs we added to our Supplies Store;
and (4) growth in postage printed, which helps drive sales of consumable
supplies such as labels. Total postage printed by customers using our service
during the third quarter of 2010 was $108 million, a 26% increase from the $86
million printed during the third quarter of 2009. As a percentage of total
revenue, product revenue was constant at 13% in the quarters ended September 30,
2010 and 2009 and increased one percentage point to 14% in the nine months ended
September 30, 2010 from 13% in the nine months ended September 30,
2009.
Insurance
revenue increased 32% to $496,000 in the third quarter of 2010 from $377,000 in
the third quarter of 2009 and increased 9% to $1.3 million in the nine months
ended September 30, 2010 from $1.2 million in the nine months ended September
30, 2009, primarily as a result of the expansion of our insurance offering to
include international packages during the third quarter of 2010. As a percentage
of total revenue, insurance revenue was 2% during each of the third quarters of
2010 and 2009 and the nine months ended September 30, 2010 and
2009.
We
reduced our PhotoStamps sales and marketing spending in 2010 compared with 2009
and plan to continue to reduce our sales and marketing spending on PhotoStamps
in future periods to improve profitability in that business. As a
result of this decision, PhotoStamps revenue decreased 24% to $1.4 million
in the third quarter of 2010 from $1.9 million in the third quarter of 2009 and
decreased 15% to $4.8 million in the nine months ended September 30, 2010 from
$5.6 million in the nine months ended September 30, 2009. As a percentage of
total revenue, PhotoStamps revenue decreased two percentage points to 7% in the
third quarter of 2010 from 9% in the third quarter of 2009 and decreased one
percentage point to 8% in the nine months ended September 30, 2010 from 9% in
the nine months ended September 30, 2009. Total PhotoStamps sheets shipped
during the third quarter of 2010 was approximately 81,000, a 29% decrease
compared to approximately 114,000 in the third quarter of 2009. Average revenue
per sheet shipped in the third quarter of 2010 was $17.89 compared to $16.70 in
the third quarter of 2009. The decrease in sheets shipped and increase in
average revenue per sheet was primarily attributable to a discounted promotion
we executed with one of our PhotoStamps partners during the third quarter of
2009 that did not repeat in the third quarter of 2010.
Other
revenue consisting of commissions from the advertising or sale of products by
third party vendors to our customer base was $19,000 in the third quarter of
2010 compared to $1,000 in the third quarter of 2009 and $22,000 in the nine
months ended September 30, 2010 compared to $6,000 in the nine months ended
September 30, 2009. Commission revenue was not material to our consolidated
financial statements.
Cost
of Revenue
Cost of
revenue principally consists of the cost of customer service, certain
promotional expenses, system operating costs, credit card processing fees, the
cost of postage for PhotoStamps, image review, printing and fulfillment costs
for PhotoStamps, parcel insurance offering costs, customer misprints and
products sold through our Supplies Store and the related costs of shipping and
handling. Total cost of revenue was $5.5 million during each of the third
quarters of 2010 and 2009 and increased 4% to $17.1 million in the nine months
ended September 30, 2010 from $16.4 million in the nine months ended September
30, 2009. As a percentage of total revenue, total cost of revenue was 27% during
each of the third quarters of 2010 and 2009 and the nine months ended September
30, 2010 and 2009.
Cost of
service revenue increased 10% to $3.2 million in the third quarter of 2010 from
$2.9 million in the third quarter of 2009 and increased 13% to $9.9 million in
the nine months ended September 30, 2010 from $8.8 million in the nine months
ended September 30, 2009. The increase during the quarter and nine months ended
September 30, 2010 was primarily attributable to the increase in service revenue
as discussed above as well as: 1) an increase in customer service costs aimed at
improving our overall customer experience and 2) an increase in promotional
expense. The increase in promotional expense was primarily attributable to
higher redemption rates of our free scale and free postage offers. Promotional
expense, which represents a material portion of total cost of service revenue,
is expensed in the period in which a customer qualifies for the promotion, while
the revenue associated with the acquired customer is earned over the customer's
lifetime. As a result, promotional expense for newly acquired customers may
exceed the revenue earned from those customers in that period. Promotional
expense was $573,000 and $449,000 in the third quarter of 2010 and 2009,
respectively. Promotional expense was $1.9 million and $1.2 million in the nine
months ended September 30, 2010 and 2009, respectively. As a percentage of total
revenue, cost of service revenue increased one percentage point to 16% in the
three and nine months ended September 31, 2010 from 15% in the three and nine
months ended September 31, 2009.
19
Cost of
product revenue increased 6% to $993,000 in the third quarter of 2010 from
$940,000 in the third quarter of 2009 and increased 10% to $3.2 million in the
nine months ended September 30, 2010 from $2.9 million in the nine months ended
September 30, 2009. The increase in costs was attributable to increased product
revenue as discussed above as well as higher fulfillment costs as we added an
east coast fulfillment center to reduce delivery times and improve customer
experience. As a percentage of total revenue, cost of product revenue was 5% in
the third quarter of 2010 and 2009 and in the nine months ended September 30,
2010 and 2009.
Cost of
insurance revenue increased 36% to $158,000 in the third quarter of 2010 from
$116,000 in the third quarter of 2009 and increased 7% to $390,000 in the nine
months ended September 30, 2010 from $364,000 in the nine months ended September
30, 2009. The increase in costs was attributable to increased insurance revenue
as discussed above. As a percentage of total revenue, cost of insurance revenue
was constant at 1% in the third quarters of 2010 and 2009 and in the nine months
ended September 30, 2010 and 2009.
Cost of
PhotoStamps revenue decreased 26% to $1.1 million in the third quarter of 2010
from $1.5 million in the third quarter of 2009 and decreased 18% to $3.6 million
in the nine months ended September 30, 2010 from $4.4 million in the nine months
ended September 30, 2009, corresponding to the decrease in PhotoStamps revenue
as discussed above. The gross margin from PhotoStamps was significantly lower
than that of our other sources of revenue because we include the stated value of
USPS postage as part of our cost of PhotoStamps revenue. As a percentage of
total revenue, cost of PhotoStamps revenue decreased two percentage points to 6%
in the third quarter of 2010 from 8% in third quarter of 2009 and decreased one
percentage point to 6% in the nine months ended September 30, 2010 from 7% in
the nine months ended September 30, 2009.
Sales
and Marketing
Sales and
marketing expense principally consists of spending to acquire new customers and
compensation and related expenses for personnel engaged in sales, marketing, and
business development activities. Sales and marketing expense decreased 5% to
$7.0 million in the third quarter of 2010 from $7.4 million in the third quarter
of 2009 and decreased 5% to $22.6 million in the nine months ended September 30,
2010 from $23.7 million in the nine months ended September 30, 2009. As a
percentage of total revenue, sales and marketing expense decreased two
percentage points to 34% in the third quarter of 2010 from 36% in the third
quarter of 2009 and decreased three percentage points to 36% in the nine months
ended September 30, 2010 from 39% in the nine months ended September 30, 2009.
The decrease, both on an absolute basis and as a percentage of total revenue,
was primarily due to our decision to decrease our enhanced promotion marketing
program expenditures and to decrease our marketing expenditures related to
PhotoStamps, partially offset by an increase in marketing program expenditures
relating to the acquisition of customers outside the enhanced promotion channel
for our PC Postage business. Ongoing marketing programs include the following:
traditional advertising, partnerships, customer referral programs, customer
re-marketing efforts, telemarketing, direct mail, and online
advertising.
Research
and Development
Research
and development expense principally consists of compensation for personnel
involved in the development of our services, depreciation of equipment and
software and expenditures for consulting services and third party software.
Research and development expense was $2.2 million in the third quarter of 2010
and 2009 and was $6.6 million in the nine months ended September 30, 2010 and
2009. As a percentage of total revenue, research and development
expense was constant at 11% in the third quarter of 2010 and 2009, and in the
nine months ended September 30, 2010 and 2009.
General and
Administrative
General
and administrative expense principally consists of compensation and related
costs for executive and administrative personnel, fees for legal and other
professional services, depreciation of equipment and software used for general
corporate purposes and amortization of intangible assets. General and
administrative expense was constant at $3.4 million in the third quarter of 2010
and 2009 and decreased 1% to $9.9 million in the nine months ended September 30,
2010 from $10.0 million in the nine months ended September 30, 2009. As a
percentage of total revenue, general and administrative expense was constant at
17% in the third quarter of 2010 and 2009 and decreased one percentage point to
16% in the nine months ended September 30, 2010 from 17% in the nine months
ended September 30, 2009.
20
Legal
Settlements and Reserves
We
entered into a settlement agreement with Kara Technology Incorporated and Mr.
Salim Kara to resolve all outstanding litigation among the parties. Under the
terms of the agreement, we made a $5.1 million payment for settlement of all
claims asserted in the litigation, purchased the patents asserted in the
litigation for $400,000, and granted Salim Kara options to purchase 35,000
shares of Stamps.com stock. Mr. Kara also agreed to cooperate with us
in the prosecution and enforcement of any patents on which he is named as an
inventor, including the patents asserted in the Stamps.com vs. Endicia
litigation matters. As a result, we recorded legal settlements and
reserves of $5.2 million in the nine months ended September 30,
2010. There were no comparable expenses in the third quarter of 2010
or 2009 or in the nine months ended September 30, 2009.
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 other income, and was
immaterial to our consolidated financial statements. Interest and other income,
net increased 5% to $219,000 in the third quarter of 2010 from $208,000 in the
third quarter of 2009 and decreased 22% to $620,000 in the nine months ended
September 30, 2010 from $797,000 in the nine months ended September 30,
2009. As a percentage of total revenue, interest and other income,
was constant at 1% in the third quarter of 2010 and 2009, and in the nine months
ended September 30, 2010 and 2009. The increase during the third quarter of 2010
was primarily due to higher interest rates, while the decrease during the nine
months ended September 30, 2010 was primarily due lower investment balancesas a
result of our use of cash to repurchase shares of our common stock.
Income
Tax Expense (Benefit)
In the
third quarter of 2010 we incurred an income tax expense of $82,000 compared with
income tax expense of $221,000 in the third quarter of 2009. During
the nine months ended September 30, 2010 we incurred an income tax benefit of
$3.8 million compared with income tax expense of $555,000 in the nine months
ended September 30, 2009. The income tax benefit in the nine months ended
September 30, 2010 was primarily due to the release of a portion our valuation
allowance against our deferred tax assets. During the second quarter of 2010, we
evaluated our deferred tax assets and concluded that an additional release of a
portion of our valuation allowance was appropriate and as a result we recorded
an income tax benefit of approximately $4.0 million. The changes in
circumstances that resulted in a release of a portion of the valuation allowance
in the second quarter of 2010 were: (i) the attainment of 5 consecutive years of
taxable income from 2005 to 2009 and (ii) a material decline in our Section 382
ownership shift under Internal Revenue Code Section 382 from approximately 34%
as of March 31, 2010 to approximately 24% as of June 30, 2010. During the nine
months ended September 30, 2010, our California state income taxes reflect
reflected our ability to use our NOLs to offset 2010 state income tax
expense. However, in October 2010, the State of California
passed legislation temporarily suspending the use of NOLs to offset current
state income tax expense for the tax years 2010 and 2011 so we expect our state
income tax expense to increase as a result.
Liquidity
and Capital Resources
As of
September 30, 2010 and December 31, 2009 we had $68 million and $72 million,
respectively, in cash, restricted cash and short-term and long-term investments.
We invest available funds in short-term and long-term securities, including
money market funds, corporate bonds, asset backed securities, and government and
agency bonds, and do not engage in hedging or speculative
activities.
There
have been no material changes to our contractual obligations and commercial
commitments included in Item 7 “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” in our Annual Report on Form 10-K
for the year ended December 31, 2009.
Net cash
provided by operating activities was $9.7 million and $7.3 million during the
nine months ended September 30, 2010 and 2009, respectively. The
increase in net cash provided by operating activities was primarily attributable
to an increase in net income and an increase in net working capital as a source
of cash.
21
Net cash
used in investing activities was $8.7 million and $4.9 million during the nine
months ended September 30, 2010 and 2009, respectively. The increase in net cash
used in investing activities was primarily attributable to increased purchase of
investment securities as compared to the same period in 2009 and an increase in
our purchases of capital equipment.
Net cash
used in financing activities was $13.0 million and $12.2 million during the nine
months ended September 30, 2010 and 2009, respectively. This increase was
primarily attributable to our increased use of cash to repurchase our stock in
2010.
On
October 28, 2010 we announced that our Board of Directors declared a one-time
special dividend of $2.00 per share to shareholders of record as of the close of
business on November 11, 2010, to be paid on December 2, 2010. Our
Board of Directors approved the special dividend to distribute excess cash from
our capital structure, and to allow our shareholders to take advantage of the
current low dividend tax rates. The total amount of
cash distributed in the dividend is expected to be approximately $28.5 million
and we anticipate ending the 2010 fiscal year with approximately $35 million in
cash and investments.
We
believe our available cash and marketable securities, together with the cash
flow from operations, will be sufficient to fund our business for at least the
next twelve months.
Critical
Accounting Policies
Management’s
discussion and analysis of our financial condition and results of operations is
based on our unaudited financial statements. The preparation of these financial
statements is based on the selection of accounting policies and the application
of significant accounting estimates, some of which require management to make
judgments, estimates and assumptions that affect the amounts reported in the
financial statements and notes. For more information regarding our critical
accounting estimates and policies, see Part II, Item 7, “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations—Critical Accounting Estimates and Policies” of our Form 10-K for the
year ended December 31, 2009.
In
addition to the above, we account for income taxes using the asset and liability
approach, which requires the recognition of taxes payable for the current year
and deferred tax assets and liabilities for the future tax consequences of
events that have been recognized in our financial statements or tax returns. The
measurement of current and deferred tax assets and liabilities is based on
provisions of enacted tax laws. The measurement of the deferred tax
asset is reduced by a valuation allowance for any tax benefits for which future
realization is uncertain. The deferred tax asset is calculated using
estimates of future taxable income. See note 7 for further
information regarding income taxes.
ITEM
3.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
Our
exposure to market rate risk for changes in interest rates relates primarily to
our investment portfolio. We have not used and do not use derivative financial
instruments in our investment portfolio. None of the instruments in our
investment portfolio are held for trading purposes. At September 30, 2010, our
cash equivalents and investments consist of money market, asset-backed
securities and US treasury and public corporate debt securities with duration of
482 days. At September 30, 2010 our cash equivalents and investments were $68
million and had a related weighted average interest rate of 1.3%. Interest rate
fluctuations impact the carrying value of the portfolio. The fair value of our
portfolio of marketable securities would not be significantly affected by either
a 10 % increase or decrease in the rates of interest due primarily to the short
duration nature of the portfolio. We do not believe that the future market risks
related to the above securities will have a material adverse impact on our
financial position, results of operations or liquidity.
As we do
not have any operations outside of the United States, we are not exposed to
foreign currency risks.
ITEM
4.
|
CONTROLS
AND PROCEDURES
|
Evaluation
of Disclosure Controls and Procedures
We
maintain disclosure controls and procedures (as such term is defined in Rules
13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Our
management evaluated, with the participation of our Principal Executive Officer
and Principal Financial Officer, the effectiveness of our disclosure controls
and procedures as of the end of the period covered by this report. Based on that
evaluation, our Principal Executive Officer and Principal Financial Officer have
concluded, as of that time, that our disclosure controls and procedures were
effective.
22
Changes
in Internal Controls
During
the quarter ended September 30, 2010, there has been no change in our internal
control over financial reporting (as defined in Rule 13a-15(f) under the
Securities Exchange Act of 1934) that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.
23
PART
II – OTHER INFORMATION
ITEM
1.
|
LEGAL
PROCEEDINGS
|
See Note
2 – Legal Proceedings of our Notes to Consolidated Financial
Statements.
RISK
FACTORS
|
We are
not aware of any material changes to the risk factors included in Item 1A “Risk
Factors” in our Annual Report on Form 10-K for the year ended December 31,
2009.
ITEM
2.
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
|
None.
Issuer
Purchases of Equity Securities
During
the third quarter of 2010, we purchased our common stock as described in the
following table:
Period
|
Total
Number of Shares Purchased
|
Average
Price Paid per Share
|
Total
Number of Shares Purchased as Part of Publicly Announced Plans or
Programs
|
Approximate
Dollar Value of Shares That May Yet be Purchased Under the Plans or
Programs (in 000’s)
|
||||||||||||
July
1, 2010 – July
31, 2010
|
44,459 | $ | 10.00 | 44,459 | $ | 16,679 | ||||||||||
August
1, 2010 – August
31, 2010
|
42,757 | $ | 11.00 | 42,757 | $ | 20,530 | ||||||||||
September
1, 2010 – September 30, 2010
|
— | — | — | $ | 20,530 |
On July
22, 2010, our Board of Directors approved a share repurchase plan effective upon
the expiration of the previous plan in August 2010, authorizing us to repurchase
up to 2.0 million shares of Stamps.com stock from August 2010 to February
2011.
Our
repurchase of any of our shares will be subject to limitations that may be
imposed on such repurchases by applicable securities laws and regulations and
the rules of The NASDAQ Stock Market. Repurchases may be made in the open
market, or in privately negotiated transactions from time to time at our
discretion. We will consider repurchasing stock under our current repurchase
program by evaluating such factors as the price of the stock, the daily trading
volume and the availability of large blocks of stock and any additional
constraints related to material inside information we may possess. We have no
commitment to make any repurchases.
ITEM
3.
|
DEFAULTS
UPON SENIOR SECURITIES
|
None.
ITEM
4.
|
RESERVED
|
ITEM
5.
|
OTHER
INFORMATION
|
None.
ITEM
6.
|
EXHIBITS
|
10.1
|
Settlement
Agreement by and among Kara Technology Incorporated, Salim Kara and
Stamps.com Inc. dated October 6,
2010.
|
24
31.1
|
Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
31.2
|
Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
32.1
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of
the Sarbanes-Oxley Act of 2002.
|
32.2
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of
the Sarbanes-Oxley Act of 2002.
|
25
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
STAMPS.COM INC. | |||
(Registrant) | |||
November
8, 2010
|
By:
|
/s/ KEN MCBRIDE | |
Ken McBride | |||
Chief Executive Officer | |||
November
8, 2010
|
By:
|
/s/ KYLE HUEBNER | |
Kyle Huebner | |||
Chief Financial Officer | |||
26