CompUSA 2014 Annual Report Download - page 57

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 (loss) per share was zero shares for the years ended December 31, 2014, 2013 and 2012. The weighted average number
of restricted stock awards included in the computation of diluted (loss) per share was zero shares for the year December 31, 2014, 2013, and
2012. The weighted average number of stock options outstanding excluded from the computation of diluted earnings per share was 0.8
million shares, 1.2 million shares and 1.1 million shares for the years ended December 31, 2014, 2013 and 2012, respectively, due to their
antidilutive effect. The weighted average number of restricted awards outstanding excluded from the computation of diluted (loss) per
share was zero shares, 0.1 million shares and zero shares for the years ended December 31, 2014, 2013 and 2012, 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 $0.9 million, $0.9 million and $1.0 million in 2014,
2013 and 2012, 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. At December 31,
2014 and 2013, 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 be representative of its fair value because of its
variable interest rate.
The fair value of goodwill, non-amortizing intangibles and long lived assets is measured in connection with the Company’
s annual
impairment testing. The Company performs a qualitative assessment of goodwill and non-
amortizing intangibles to determine whether it is
more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment shows that the fair
value of the reporting unit exceeds its carrying amount, the company is not required to complete the annual two step goodwill impairment
test. If a quantitative analysis is required to be performed 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. Long lived assets are assets used in the Company’
s
operations and include leasehold improvements, warehouse and retail store fixtures and similar property used to generate sales and cash
flows. Long lived assets are tested for impairment utilizing a recoverability test. The recoverability test compares the carrying value of an
asset group to the undiscounted cash flows directly attributable to the asset group over the life of the primary asset. If the undiscounted cash
flows of an asset group is less than the carrying value of the asset group, the fair value of the asset group is then measured. If the fair value
is also determined to be less than the carrying value of the asset group, the asset group is impaired. In 2014 the Company’
s evaluation of the
intangible assets in its Technology Products segment in North America concluded that certain long lived assets were impaired and an
impairment charge of approximately $9.5 million, pre-tax, was recorded in the fourth quarter of 2014.
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 2014, two
vendors accounted for 10% or more of our purchases –
one vendor was 12.6%; the other vendor was 11.6%. In 2013, one vendor accounted
for 13.9% of our purchases and in 2012, no vendor accounted for 10% or more of our purchases.
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