Travelzoo 2009 Annual Report Download - page 71

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number of common shares outstanding for the effect of potential common shares outstanding during the period.
Potential common shares included in the diluted calculation consist of incremental shares issuable upon the exercise
of outstanding stock options calculated using the treasury stock method.
The following table sets forth the calculation of basic and diluted net income (loss) per share (in thousands,
except per share amounts):
2009 2008 2007
Year Ended
December 31,
Net income (loss):
Net income from continuing operations, net of tax............. $ 6,418 $ 5,913 $12,108
Loss from discontinued operations, net of tax ................ (1,233) (10,029) (2,999)
Net income (loss) ..................................... $ 5,185 $ (4,116) $ 9,109
Weighted average common shares ......................... 16,408 14,273 14,847
Effect of dilutive securities — stock options ................. 8 1,917 1,227
Diluted weighted average common shares ................... 16,416 16,190 16,074
Basic net income (loss) per share from:
Continuing operations .................................. $ 0.39 $ 0.41 $ 0.82
Discontinued operations ................................ $ (0.08) $ (0.70) $ (0.20)
Net income (loss) ..................................... $ 0.32 $ (0.29) $ 0.61
Diluted net income (loss) per share from:
Continuing operations .................................. $ 0.39 $ 0.37 $ 0.75
Discontinued operations ................................ $ (0.08) $ (0.62) $ (0.19)
Net income (loss) ..................................... $ 0.32 $ (0.25) $ 0.57
There were options to purchase an additional 300,000 shares of common stock outstanding as of December 31,
2009, but because the exercise price of these options was higher than the closing stock price at December 31, 2009,
they have been excluded from the computation of diluted net loss per share for the year ended December 31, 2009 as
their effect was anti-dilutive. All options outstanding as of December 31, 2008 and 2007 were included in the
computation of diluted net income (loss) per share for the years ended December 31, 2008 and 2007.
(d) Use of Estimates
Management of the Company has made a number of estimates and assumptions relating to the reporting of
assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities to prepare these
financial statements in conformity with accounting principles generally accepted in the United States of America.
Actual results could differ materially from those estimates.
(e) Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Additions, improvements and major
renewals are capitalized. Maintenance, repairs and minor renewals are expensed as incurred. The Company also
includes in fixed assets the capitalized cost of internal-use software and Web site development, including software
used to upgrade and enhance its Web site and processes supporting the Company’s business in accordance with the
framework established by the FASB accounting guidance for accounting for the cost of computer software
developed or obtained for internal use and accounting for Web site development costs. Costs incurred in the
planning stage and operating stage are expensed as incurred while costs incurred in the application development
stage and infrastructure development stage are capitalized, assuming such costs are deemed to be recoverable.
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