Travelzoo 2002 Annual Report Download - page 36

the recoverability of our intangible assets in accordance with Statement of Financial Accounting Standards
No. 144, ""Impairment of Long-Lived Assets,'' which required us to assess these assets for recoverability when
events or circumstances indicate a potential impairment by estimating the undiscounted cash Öows to be
generated from the use of these assets. No impairment losses were recorded related to intangible assets in
2002. Any future impairment losses recorded in the future could have a material adverse impact on our
Ñnancial conditions and results of operations.
Income Taxes
For the year ended December 31, 2002, we recorded an income tax provision of $573,000. For the years
ended December 31, 2001 and 2000, we recorded income tax provisions of $521,000 and $388,000,
respectively. Our income is generally taxed in the U.S. and our income tax provision reÖects federal and state
statutory rates applicable to our levels of income and the eÅect of non-deductible merger expenses in 2000,
2001 and 2002.
Liquidity and Capital Resources
As of December 31, 2002, we had $1.3 million in cash and cash equivalents. Cash and cash equivalents
increased from $610,000 on December 31, 2001 primarily as a result of operating income and an increase in
accounts payable and accrued expenses oÅset by income tax payments and an increase in accounts receivable.
Cash and cash equivalents increased to $610,000 on December 31, 2001 from $46,000 on December 31, 2000
primarily as a result of operating income and an increase in accrued expenses and income tax payable oÅset by
an increase in accounts receivable and deposits. We expect that cash Öows generated from operations will
continue to be suÇcient to provide for working capital needs for at least the next 12 months.
Net cash provided by operating activities in the year ended December 31, 2002 was $769,000. Net cash
provided by operating activities in the year ended December 31, 2001 was $771,000. Net cash provided by
operating activities in the year ended December 31, 2000 was $409,000. In the year ended December 31, 2002,
net cash provided by operating activities resulted primarily from operating income and an increase in accounts
payable and accrued expenses oÅset by income tax payments and an increase in accounts receivable. In the
year ended December 31, 2001, net cash provided by operating activities resulted primarily from our net
income, adjusted for certain non-cash items, and a decrease in prepaid expenses oÅset by increase in deposits.
In the year ended December 31, 2000, net cash provided by operating activities resulted primarily from our net
income, adjusted for certain non-cash items, and an increase in income tax payable oÅset by an increase in
accounts receivable.
Net cash used in investing activities was $121,000, $156,000, and $428,000 during the years ended
December 31, 2002, 2001 and 2000, respectively. In all periods, net cash was used in investing activities for
equipment purchases, and in 2000 $125,000 was used for the purchase of a domain name.
Net cash provided by Ñnancing activities was $0 in the year ended December 31, 2002. Net cash used in
Ñnancing activities was $50,000 for the year ended December 31, 2001. Net cash provided by Ñnancing
activities was $54,000 for the year ended December 31, 2000. In the year ended December 31, 2001, net cash
was used in Ñnancing activities for repayment of a loan made to Travelzoo by Ralph Bartel, its principal
stockholder. In the year ended December 31, 2000, net cash was provided by a loan by Mr. Bartel and exercise
of stock options by an employee.
Our capital requirements will depend on a number of factors, including market acceptance of our
products and services, the amount of our resources we devote to the Travelzoo website, the Travelzoo Top 20
newsletter, the Weekend.com newsletter and expansion of our operations and the amount of our resources we
devote to promoting awareness of the Travelzoo brand. Consistent with our growth, we have experienced a
substantial increase in our sales and marketing expenses and capital expenditures since inception, and we
anticipate that these increases will continue for the foreseeable future. We believe cash on hand and generated
during those periods will be suÇcient to pay such costs. In addition, we will continue to evaluate possible
investments in businesses, products and technologies, the consummation of any of which would increase our
capital requirements.
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