Travelzoo 2012 Annual Report Download - page 96

Net cash used in investing activities increased $1.2 million in 2012 compared to 2011. The $1.2 million increase in cash used in investing
activities was due primarily to a $677,000 increase in purchase of intangible assets, a $284,000 increase in purchases of property and equipment
and a $272,000 increase in restricted cash. Net cash used in investing activities decreased by $1.0 million in 2011 compared to 2010. This
decrease in net cash used in investing activities was primarily due to a $2.2 million decrease in restricted cash, offset by a $1.2 million increase
in purchases of property and equipment.
Net cash used by financing activities was $11.5 million in 2012 and $14.8 million 2011. Net cash provided by financing activities was
$1.1 million for 2010. Net cash used by financing activities in 2012 was due to a $11.5 million repurchase of our common stock. Net cash used
by financing activities in 2011 was due to a $15.1 million repurchase of our common stock offset by proceeds from the exercise of stock options
and the excess tax benefit from exercise of stock options. The net cash provided by financing activities in 2010 resulted from the cash received
from the sale of our Asia Pacific business segment.
On April 21, 2011, the Company entered into an agreement which required a $20.0 million cash payment to the State of Delaware
resolving all claims relating to the State of Delaware’s unclaimed property review, which related primarily to unexchanged promotional merger
shares contingency. Since March 2012, the Company has become subject to unclaimed property reviews by most of the other states in the U.S.
that relate primarily to the unexchanged promotional merger shares, which were not covered by the settlement and release by the State of
Delaware. During the three months ended March 31, 2012 , the Company recorded a $3.0 million charge related to this unexchanged
promotional merger shares contingency. While the Company believes it has meritorious defenses regarding the applicability of escheat rights
related to this unexchanged promotional merger shares contingency, the ultimate resolution of this matter may take longer than one year to
resolve. If the claims for all of the additional shares referred to in the preliminary findings were upheld in full, based on the closing price of the
Company’s shares at the end of December 2012, the cost to the Company would be approximately $ 18.1 million in excess of the amount
accrued, plus any interest or penalties which might be applicable. In addition, the total amount of exposure of this contingency is dependent upon
the manner in which each state applies its unclaimed property laws. The Company is not able to predict the ultimate amount or outcome of any
current or future claims which have been or might be asserted relating to the unissued shares.
The Company is continuing its program under which it makes cash payments to people who establish that they satisfy the condition to
receive shares of Travelzoo.com Corporation, and who failed to submit requests to convert their shares into shares of Travelzoo Inc. within the
required time period. See Note 1 to the accompanying consolidated financial statements for further details.
In July 2012, the Company announced a stock repurchase program authorizing the repurchase of up to 1,000,000 shares of the Company’s
outstanding common stock. As of December 31, 2012 , the Company repurchased 600,000 shares of common stock for an aggregate purchase
price of $ 11.5 million . There are 400,000 shares remaining to be repurchased under this program.
Our capital requirements depend on a number of factors, including market acceptance of our products and services, the amount of our
resources we devote to the development of new products, cash payments to former stockholders of Travelzoo.com Corporation, expansion of our
operations, and the amount of resources we devote to promoting awareness of our Travelzoo and Fly.com brands. Since the inception of the
program under which we make cash payments to people who establish that they were former stockholders of Travelzoo.com Corporation, and
who failed to submit requests to convert their shares into shares of Travelzoo Inc. within the required time period, we have incurred expenses of
$2.9 million. While future payments for this program are expected to decrease, the total cost of this program is still undeterminable because it is
dependent on our stock price and on the number of valid requests ultimately received. In addition, we do not know if the current unclaimed
property audits that are focused on the unexchanged promotional merger shares will result in additional payments to states or former
stockholders of Travelzoo.com Corporation.
Consistent with our growth, we have experienced substantial increases in our cost of revenues, sales and marketing expenses and our
general and administrative expenses, including increases in product development costs, and we anticipate that these increases will continue for
the foreseeable future. We believe cash on hand will be sufficient to pay such costs for at least the next twelve months. 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.
Although we currently believe that we have sufficient capital resources to meet our anticipated working capital and capital expenditure
requirements for at least the next twelve months, unanticipated events and opportunities or a less favorable than expected development of our
business in Europe with one or more of advertising formats may require us to sell additional equity or debt securities or establish new credit
facilities to raise capital in order to meet our capital requirements.
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