Travelzoo 2003 Annual Report Download - page 41

ended December 31, 2003 and 2002 was also due to an increase of our sales force and our decision to hire
more experienced sales personnel.
General and Administrative
General and administrative expenses consist primarily of compensation for administrative and executive
staÅ, fees for professional services, rent, bad debt expense, amortization of intangible assets and general oÇce
expense. General and administrative expenses increased to $4.3 million for the year ended December 31, 2003
and to $2.3 million for the year ended December 31, 2002 from $1.4 million for the year ended December 31,
2001. General and administrative expenses increased primarily due to increases in expenses for oÇce space
and legal and professional services which included non-recurring and non-tax deductible expenses of $328,000
related to the secondary oÅering that was completed in October 2003. General and administrative expenses for
the year ended December 31, 2001 include a credit of $128,000 for a reduction to the bad debt reserve
principally due to the collection of a doubtful account.
Merger Expenses
Merger expenses consist of expenses relating to the registration statement and proxy statement Ñled with
the SEC relating to the merger of Travelzoo.com Corporation into Travelzoo Inc. which was completed in
2002. As a result, merger expenses decreased to $-0- for the year ended December 31, 2003 from $55,000 for
the year ended December 31, 2002 and $333,000 for the year ended December 31, 2001. The expenses
consisted mostly of fees for professional services, primarily legal and accounting.
Income Taxes
For the year ended December 31, 2003, we recorded an income tax provision of $1.7 million. For the
years ended December 31, 2002 and 2001, we recorded income tax provisions of $573,000 and $521,000,
respectively. Our income is generally taxed in the U.S. and our income tax provisions reÖect federal and state
statutory rates applicable to our levels of income and the eÅect of non-deductible oÅering costs and merger
expenses in 2003, 2002, and 2001. The eÅective tax rates for 2003, 2002, and 2001 were 45%, 40%, and 59%,
respectively.
Liquidity and Capital Resources
As of December 31, 2003, we had $3.5 million in cash and cash equivalents. Cash and cash equivalents
increased from $1.3 million on December 31, 2002 primarily as a result of cash provided by operations
explained below. Cash and cash equivalents increased to $1.3 million on December 31, 2002 from $610,000 on
December 31, 2001 primarily as a result of cash provided by operations explained below. 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, 2003 was $2.4 million. 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. In the year ended December 31,
2003, net cash provided by operating activities resulted primarily from net income and a net increase in
income tax payable and accrued expenses oÅset by an increase in accounts receivable. In the year ended
December 31, 2002, net cash provided by operating activities resulted primarily from net 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.
Net cash used in investing activities was $120,000, $121,000 and $156,000 during the years ended
December 31, 2003, 2002 and 2001, respectively. In all periods, net cash was used in investing activities for
equipment purchases, except for 2001, which included $125,000 for the purchase of a domain name.
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