Travelzoo 2007 Annual Report Download - page 74

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(c) Net Income Per Share
Net income per share has been calculated in accordance with Statement of Accounting Standards (“SFAS”)
No. 128, “Earnings per Share.” Basic net income per share is computed using the weighted-average number of
common shares outstanding for the period. Diluted net income per share is computed by adjusting the weighted-
average number of common shares outstanding for the effect of potential common shares outstanding during the
period. Potential common shares included in the diluted calculation consist of incremental shares issuable upon the
exercise of outstanding stock options calculated using the treasury stock method.
The following table sets forth the calculation of basic and diluted net income per share (in thousands, except
per share amounts):
2007 2006 2005
Year Ended December 31,
Basic net income per share:
Net income . ....................................... $ 9,109 $16,803 $ 7,963
Weighted average common shares ....................... 14,847 15,503 16,249
Basic net income per share ........................... $ 0.61 $ 1.08 $ 0.49
Diluted net income per share:
Net income . ....................................... $ 9,109 $16,803 $ 7,963
Weighted average common shares ....................... 14,847 15,503 16,249
Effect of dilutive securities — stock options ................ 1,227 1,209 1,482
Weighted average common and potential common shares ...... 16,074 16,712 17,731
Diluted net income per share ......................... $ 0.57 $ 1.01 $ 0.45
(d) Use of Estimates
Management of the Company has made a number of estimates and assumptions relating to the reporting of
assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities to prepare these
financial statements in conformity with accounting principles generally accepted in the United States of America.
Actual results could differ materially from those estimates.
(e) Property and Equipment
Property and equipment consisted of the following (in thousands):
2007 2006
December 31,
Computer hardware and software ................................... $ 439 $372
Office equipment ............................................... 913 442
Leasehold improvements ......................................... 69 —
1,421 814
Less accumulated depreciation ..................................... 799 642
Total ........................................................ $ 622 $172
Property and equipment are stated at cost less accumulated depreciation. Additions, improvements and major
renewals are capitalized. Maintenance, repairs and minor renewals are expensed as incurred. Depreciation is
provided using the straight-line method over the estimated useful lives of the assets. Estimated useful lives are
42
TRAVELZOO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)