CompUSA 2012 Annual Report Download - page 50

Prepaid expenses as of December 2012 and 2011 include deferred advertising costs of $1.5 million and $1.7 million, respectively which
are reflected as an expense during the periods benefited, typically the subsequent fiscal quarter.
Stock based compensation — The Company recognizes the fair value of share based compensation in the consolidated statement of
operations over the requisite employee service period. Stock-based compensation expense includes an estimate for forfeitures and is
recognized over the expected term of the award.
Net Income Per Common Share – Net income per common share - basic was calculated based upon the weighted average number of
common shares outstanding during the respective periods presented using the two class method of computing earnings per share. The two
class method was used as the Company has outstanding restricted stock with rights to dividend participation for unvested shares. Net
income per common share - diluted was calculated based upon the weighted average number of common shares outstanding and included
the equivalent shares for dilutive options outstanding during the respective periods, including unvested options. The dilutive effect of
outstanding options and restricted stock issued by the Company is reflected in net income per share - diluted using the treasury stock
method. Under the treasury stock method, options will only have a dilutive effect when the average market price of common stock during
the period exceeds the exercise price of the options. The weighted average number of stock options outstanding included in the
computation of diluted earnings per share was zero for the year ended December 31, 2012 and 0.3 million and 0.6 million for the years
ended December 31, 2011 and 2010, respectively. The weighted average number of restricted stock awards included in the computation of
diluted earnings per share was 0.0 million for the year December 31, 2012 and 0.1 million and 0.2 million for the years ended December
31, 2011 and 2010, respectively. The weighted average number of stock options outstanding excluded from the computation of diluted
earnings per share was 1.1 million for the year ended December 31, 2012 and 0.8 million and 0.7 million for the years ended December
31, 2011 and 2010, respectively, due to their antidilutive effect.
Employee Benefit Plans - The Company’s U.S. subsidiaries participate in a defined contribution 401(k) plan covering substantially all
U.S. employees. Employees may invest 1% or more of their eligible compensation, limited to maximum amounts as determined by the
Internal Revenue Service. The Company provides a matching contribution to the plan, determined as a percentage of the employees’
contributions. Aggregate expense to the Company for contributions to such plans was approximately $1.0 million, $1.0 million and $0.9
million in 2012, 2011 and 2010, respectively.
Fair Value Measurements - Financial instruments consist primarily of investments in cash, trade accounts receivable debt and accounts
payable. The Company estimates the fair value of financial instruments based on interest rates available to the Company and by
comparison to quoted market prices. At December 31, 2012 and 2011, the carrying amounts of cash, accounts receivable and accounts
payable are considered to be representative of their respective fair values due to their short-term nature. The Company’s debt is
considered to representative of its fair value because of its variable interest rate.
The fair value of goodwill and non-amortizing intangibles is measured on a non-recurring basis in connection with the Company’s annual
impairment testing. For goodwill, the fair value of the reporting unit to which the goodwill has been assigned is determined using a
discounted cash flow model. A discounted cash flow model is also used to determine fair value of indefinite-lived intangibles using
projected cash flows of the intangible. Unobservable inputs related to these discounted cash flow models include projected sales growth,
same store sales growth, gross margin percentages, new business opportunities, working capital requirements, capital expenditures and
growth in selling, general and administrative expense and are classified in accordance with ASC 820, “Fair Value Measurements and
Disclosures”, within Level 3 of the valuation hierarchy.
Significant Concentrations- Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash,
and accounts receivable. The Company’s excess cash balances are invested with money center banks. Concentrations of credit risk with
respect to accounts receivable are limited due to the large number of customers and their geographic dispersion comprising the
Company’s customer base. The Company also performs on-going credit evaluations and maintains allowances for potential losses as
warranted.
We purchase substantially all of our products and components directly from manufacturers and large wholesale distributors. In 2012, no
vendor accounted for 10% of more of our purchases. One vendor accounted for 11.5% and 10.0% of our purchases in 2011 and 2010,
respectively. The loss of these vendors, or any other key vendors, could have a material adverse effect on us.
Table of Contents
47