Travelzoo 2007 Annual Report Download - page 82

will not be any assessment of penalties. A reconciliation of the beginning and ending amount of unrecognized tax
benefits is as follows (in thousands):
Unrecognized tax benefits balance at January 1, 2007 ............................. $1,107
Increase related to prior year tax positions ..................................... 38
Decrease related to prior year tax positions ..................................... —
Increase related to current year tax positions .................................... —
Settlements ............................................................ —
Lapse of statute of limitations .............................................. —
Unrecognized tax benefits balance at December 31, 2007 .......................... $1,145
At December 31, 2007, the total unrecognized tax benefits of approximately $1.1 million, if recognized, would
favorably affect the Company’s effective income tax rate.
We file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. We are
no longer subject to U.S. federal and certain state tax examinations for years before 2004. We are no longer subject
to California tax examinations for years before 2003. The Company is currently under examination by the
California Franchise Tax Board of California for the 2004 and 2005 tax years.
(5) Stockholders’ Equity
As of December 31, 2007, the authorized capital stock of Travelzoo Inc. was comprised of 40,000,000 shares
of $.01 par value common stock and 5,000,000 shares of $.01 par value preferred stock. As of December 31, 2007,
there were 14,250,479 shares outstanding of common stock and no shares of preferred stock issued or outstanding.
During January 2001, the Board of Directors of Travelzoo.com Corporation proposed that Travelzoo.com
Corporation be merged with Travelzoo Inc. whereby Travelzoo Inc. would be the surviving entity. On March 15,
2002, the stockholders of Travelzoo.com Corporation approved the merger with Travelzoo Inc. On April 25, 2002,
the certificate of merger was filed in Delaware upon which the merger became effective and Travelzoo.com
Corporation ceased to exist. Each outstanding share of common stock of Travelzoo.com Corporation was converted
into the right to receive one share of common stock of Travelzoo Inc. Under and subject to the terms of the merger
agreement, stockholders were allowed a period of two years following the effective date of the merger to receive
shares of Travelzoo Inc. The records of Travelzoo.com Corporation showed that, assuming all of the shares applied
for by the Netsurfer stockholders were validly issued, there were 11,295,874 shares of Travelzoo.com Corporation
outstanding. As of April 25, 2004, two years following the effective date of the merger, 7,180,342 shares of
Travelzoo.com Corporation had been exchanged for shares of Travelzoo Inc. Prior to that date, the remaining shares
which were available for issuance pursuant to the merger agreement were included in the issued and outstanding
common stock of Travelzoo Inc. and included in the calculation of basic and diluted earnings per share. After
April 25, 2004, the Company ceased issuing shares to the former stockholders of Travelzoo.com Corporation, and
no additional shares are reserved for issuance to any former stockholders, because their right to receive shares has
now expired. On April 25, 2004, the number of shares reported as outstanding was reduced from 19,425,147 to
15,309,615 to reflect actual shares issued as of the expiration date.
In February 2006, Travelzoo announced a share repurchase program authorizing the repurchase of up to
1.0 million shares of common stock in the open market or in private transactions. During the year ended
December 31, 2006, the Company purchased and retired 1.0 million shares of common stock for aggregate
consideration of $28.6 million and completed the share repurchase under this program.
In April 2007, Travelzoo announced a share repurchase program authorizing the repurchase of up to 1.0 million
shares of common stock in the open market or in private transactions. During the year ended December 31, 2007, the
Company purchased and retired 1.0 million shares of common stock for aggregate consideration of $19.8 million
and completed the share repurchase under this program.
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TRAVELZOO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)